Industry characteristics
The international scope of the Automotive sector is confirmed by this 1999
Survey, with three-quarters of the companies polled operating plants outside their home
country. The extent of the internationalization of supply is revealed with 86 percent of
respondents selling to foreign markets. With 40 percent covering more than ten countries,
it is not surprising that the European Automotive Industry wishes to adopt the Euro as its
currency. In Europe such an international aspect requires bilingual staff and the price
stability and transparency made possible by the Euro currency. However, Italy and the USA
displayed less of an international tendency when participating in global supply,
confirming that homogenization is still incomplete.

The internationalization of vehicle
platforms, in production and distribution, has increasingly led to rationalization of
organizations on a global basis: 51 percent of all companies surveyed have been involved
in a merger or an acquisition over the past 18 months, particularly in Central and
Northern Europe.

The Survey indicates less instability and
uncertainty in the Automotive Supplier Industry than in the previous year. However, the
pressure for improvement is unrelenting. This pressure is being placed on a Supply Chain
that has, on average, Material Requirements Planning (MRP)/ Enterprise Resource Planning
(ERP) systems that are five and a half years old. At least one fifth of the ERP systems
are more than ten years old in France, the USA, Australia and in the UK. This suggests
that the process of consolidation continues to offer the opportunity to improve Supply
Chain performance by replacing and up-grading systems.

Industry issues
The Survey highlights product quality as being the major concern within the
industry, followed in second place by the need for closer integration with customers.
These positions are the reverse of last year’s results. The very high demand for ERP
systems in the last six months, spurred on by the year 2000 issue, has resulted in an
industry that is better equipped to integrate with its customers. These ERP systems offer
the chance to improve integration and an increase in their adoption has been accompanied
by a fall in concern over the integration issue.

Product quality issues
Each new model is setting higher standards in quality. Vehicle manufacturers
now talk of zero defects as a quality measure. The gauge used to express quality is the
number of defects per million parts produced. Vehicle manufacturers are perpetually
‘raising the bar’ over which suppliers have to jump, or be excluded from future
contracts. This shakes out the poorer performers and realizes the true benefits that
quality can bring. If quality is improved then productivity is automatically enhanced.

Integration issues
The main stay of the Supply Chain integration process is Electronic Data
Interchange (EDI). However, the level of integration still needs to progress. The
internationalization of the industry mentioned previously suggests that a harmonization of
message standards to EDIFACT is required. The heavy influence of Original Equipment
Manufacturers (OEMs) within their domestic environments is clearly visible when the
results are viewed by country. Having promoted the widespread adoption of EDI for
communication, the high level of adoption is such that emphasis is now being placed on the
automatic integration of EDI messages into the supplier’s ERP system. It is anticipated
that the international nature of the Supply Chain will erode the domestic influence of
OEMs over time.

60 percent of overall revenue is currently
transacted via EDI. In the UK, Germany and the USA, more than half of the sector plans to
establish EDI communication with suppliers within two years. Also, half of the sites still
require better integration for EDI transactions made with customers.

Operational issues
The use of flowline manufacturing techniques is clearly preferred as the
mainstay for operational efficiency. As the Industry continues to seek and obtain more
flexibility agreements from the workforce, there is a reduction in the emphasis given to
resource planning. The pressure on costs is apparent with suppliers expressing a strong
view on the importance of buying more competitively and quoting more accurately. The type
of product made appears to have little significance with all types of suppliers sharing
the same concerns. However, the smaller suppliers seem to share the more traditional
concerns of the Industry.

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