SWITZERLAND: Suppliers, car makers disagree on low-cost sources
Contrary to accepted wisdom, the bulk of car components will continue to be sourced relatively locally, rather than brought in from low manufacturing-cost countries, logistics executives have said during a conference.
"We think most sourcing will remain relatively local," said Ryder System vice-president Jim Moore at the Automotive Logistics Europe conference in Montreux, Switzerland.
Gefco CEO Christian Zbylut agreed. "The increase in distance and complexity, and the reduction of supply chain reliability, means that purchasing savings can easily be offset by supply chain management costs," he said. "Our belief is that a maximum of 30% content will be considered real inter-continental sourcing."
Moore echoed this concern that raised logistics costs would undermine the advantages of sourcing cheaper materials: "There's always a competitive tension between material sourcing and logistics sourcing," he said. "It can cost more for inland transport from the factory to the port in China than the cost of shipping from China to the US."
These views contradict what car makers think will happen, however. Supply chain management software maker i2 conducted a survey of car makers' attitudes.
Cary VandenAvond, vice president of the automotive, aerospace and defence, industrial and metals division, said: "We conducted a study with OEM customers about where they thought things were going. They said they expected three times as much content to be sourced from low-cost economies in the next five years."