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Future threats to automotive supply debated in Dearborn

More than 200 of the world’s most senior automotive logistics executives gathered at the heart of the US auto industry on September 13 and 14 to talk about the implications of the sweeping changes now affecting the modern car business. As Congress debated stringent new security rules for US ports, delegates from the major carmakers, tier suppliers and logistics service providers discussed the challenges and risks of moving to an increasingly global supply base.

In an industry stuggling to simultaneously cut costs, drive up service levels and increase product diversity, increasing attention is being placed upon the role that innovative supply chain and logistics practices may have in returning the sector to profitability. 

By 2010, Ford expects to be purchasing 50 per cent of its service parts from Asia, principally China, said Frederiek Toney, Executive Director, MP&L at Ford Motor Company. In an industry that has pioneered just-in-time strategies to cut costs by minimising the amount of inventory in the supply chain, the move to extend transportation, from one or two days by truck to several weeks by ship, is calling for new thinking.

According to Vicki O’Meara, President of US Supply Chain Solutions at logistics company Ryder System, Ryder’s automotive customers are demanding increases in inventory to mitigate the risks associated with bringing parts in from overseas. By contrast, other speakers, such as Peter Weiss, Director, Worldwide Transportations & Customs, Procure-ment and Supply at DaimlerChrysler, suggest that it is preferable to adopt a risk management approach with multiple alternative transportation options in place to overcome potential problems. 

While globalisation is seen as a vital element in cost control in the car industry today, other industries have already moved considerably further down that road. According to Jon Langenfeld, Director at analyst Robert W Baird & Co., the US car industry currently sources around 20 per cent of its parts abroad, compared with nearly 90 per cent in the footwear and apparel sector. So is the auto industry a supply chain leader or a follower? The conference was sharply divided here, with some speakers like supply chain guru Philip Abraham, President of the Abraham and Stella groups, putting the car businesss “dead last” out of all major industries. Others disagreed fervently. John Lacny, Director of Global Transportation and Logistics at Lear Corporation, pointed out that auto industry supply chain specialists are becoming highly sought after by other industries, thanks to their cost cutting expertise.

Whatever the industry’s current position, it is its future challenges that most concerned the delegates, and there was substantial agreement here that increased collaboration between carmakers, their suppliers and their logistics providers is essential if the performance of the supply chain is to meet future expectations. Many speakers also expressed concern that the industry needs to do more to recruit and nurture talent if it is to have the skills it will need in the years to come.

The Automotive Logistics Global Conference is organised by Ultima Media, with Ryder as premier sponsor, RedPrairie as global sponsor, Midwest Express Group, i2 and Panalpina as gold sponsors and NYK Logistics, Tenmark, Union Pacific Distribution Services and UPS as silver sponsors.