Four ways to better manage the auto supply chain

• Source: Gasgoo.com
• [08:06 September 25 2009]
• Comments

3. Try different programs, different ideas with suppliers.

As I mentioned, people can have up to 10,000 different suppliers for different things. One thing a manufacture could think about may be to trim down, to limit the number to maybe 5,000 instead of 10,000, to have people supply more things if it is possible. Managing 5,000 suppliers is always easier than managing 10,000.

And if could just have five suppliers, that would be even better, but that is certainly not possible. So evaluating your vendor list, and looking for ways to possibly trimming the whole management process of your suppliers would be really helpful as well.

Another example of this could be location. For a global manufacturer in China, instead of using a supplier from Mexico, maybe you can use some from Indonesia, and that always cuts down the logistics cost.

The regional supplier can be more helpful than worldwide supplier. Certain very high quality components, you have to import from the US or the Europe, but a lot of other things can be put used and supplied regionally instead of in long distance.

4. Have a good relationship with suppliers, which is always very helpful.

Although it requires a lot of effort to try to understand each other better instead of being passed on to each other, I think it’s something they should manage as well.

Gasgoo.com: You mentioned regional supplier can be more helpful than worldwide supplier. Can you give us the reasons for this judgment?

Tao Lin: I think there are two reasons, one is that places like Mexico have been major hub for American manufacturers as an outsourcer of different parts, because it is so close to the US, and over the years they have developed very sophisticated facilities, technology and knowledge on how to make these parts and supply to them.

So naturally there are a lot of new manufacturers such as those in China would think Mexico as one of their options. However the problem is that Mexico and etc are so far away from China. I think in the beginning you could cope with it by buying parts from all over the world just to make sure you have the parts to make the cars.

But eventually you should develop your own suppliers within regional areas, in order to achieve more cost efficiency.

Gasgoo.com: Do you think regional sourcing would become a new trend instead of global sourcing?

Tao Lin: I don’t know if it would become a new trend, but I think it should be a good practice in order to get the cost down.

Let's say, if you are sitting in China, and you want to outsource to Indonesia instead of Mexico, but there is a switching cost, you have to make sure that you invest into Indonesia, and you build new relationships, and you even help people to develop their facilities before you can switch from one place to another.