In the world of automotive supply chain management, there are many suppliers and machines waiting to work with you. When it comes to production, a lot depends on the relationship that you have established with these suppliers. They can either help you build quality vehicles and make them affordable for the end users or they can ruin your production efforts. Hence, you need to be careful about whom you choose as your supplier.
The Automotive manufacturers are grouped in four categories, namely, direct suppliers, middle-man manufacturers, direct supplier and multiple supply chain participants. Each type has its own advantages and disadvantages. For instance, the indirect suppliers can provide low input costs, but they can delay the delivery of raw materials. On the other hand, the direct suppliers can provide fair and consistent pricing and can provide higher flexibility but the delay in delivery may become a problem in the long run.
A common problem faced by the American automobile manufacturers is the irregularity in the pricing of their products. They have to cope with the variation in factors such as costs of raw materials, labor rates and other overhead expenses. Sometimes, they cannot afford to reduce the prices of their products. This is one of the reasons why American automobile manufacturers tend to focus on the development of new technologies, launch new products and bring out new models on a very short notice. The parts industry, on the other hand, needs constant support from the automotive manufacturers.
There are some American automobile manufacturers that do not sell their products directly to the end users. Instead of this, they prefer to partner with small and medium-sized businesses (SMEs) in the auto industry. These suppliers can provide a large customer base that can help them increase their sales and profits. It is the SMEs that also bear the burden of delivering goods to the final consumers and the manufacturers find it easy to integrate these suppliers into their supply chain.
Small and medium-sized businesses can either specialize in specific product categories or deal with a wide array of products. This gives them the flexibility to customize their products according to their needs. The automotive supply chain visibility of SMEs allows the manufacturers to add these specialized suppliers to their existing business network. This leads to increased efficiency and helps them gain competitive advantage over their foreign competition.
In addition to having these flexible partnerships, American automobile manufacturers also need to retain manufacturing and distribution networks in their home country. Some countries are able to support their manufacturers better than others. For instance, many Asian countries suffer from chronic inflation that has made purchasing cars at a low price a very expensive affair. At times, it becomes impossible for the domestic car manufacturing companies to manage the cost of manufacturing the vehicles. Hence, some manufacturers look to Asia in order to get rid of the inflated prices and still make a profit from their contracts.
With the uncertainties of globalization, American automobile manufacturers have to be highly contingent when it comes to making the right decisions. They should carefully consider the kind of partnerships that they are entering into. It is important that they develop joint ventures with the right suppliers, distributors and assemblers. They should also consider outsourcing their entire automotive manufacturing processes to ensure a strong automotive manufacturing base in the U.S.
In the end, these strategies can bring additional benefits to both parties. The OEM can gain greater visibility globally as the vehicles will be distributed via the various dealers around the world. The distributors will be able to benefit from increased sales and a solid customer base in the U.S. The suppliers will be able to expand their business operations as they get additional contract orders as well as positive feedback from customers.