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19 April 2013

US vehicle manufacturers expressing supplier risk management

Content team

Some of the largest motor vehicle manufacturing companies in the US have significantly increased production this year, but suppliers are struggling to keep up.

As Ford, Hyundai and Toyota all look to step up the amount of cars they produce as the effects of the global recession ease, a large number of component suppliers have been unprepared for this move, with many having cut operations during the economic downturn, Plastics News reports.

According to consulting firm IHS Automotive, light-vehicle production in North America is set to reach 15.9 million units this year, up from 12 million in 2010.

However, many suppliers are now reluctant to expand their operations, after a large number were forced to cut capacity and close plants to keep their head above water during the recession. These companies are proving unwilling to take chances when asked to boost production.

As a result, there is a clear risk of severe bottlenecks occurring in production, especially as 43 new launches are scheduled to take place in 2014 - more than double the amount this year (20).

To prevent this, the automakers are seeking to identify signs of stress among their suppliers and one of the key indicators they are looking for is a firm that switches to round-the-clock operations.

Jim Young, chief purchaser for Toyota in North America, said 24-hour production "immediately throws up a flag".

"It means we have to visit them to understand their true condition," he added.

Honda purchaser Tom Lake conceded that it is unreasonable to assume suppliers will be able to accommodate every request from car manufacturers.

"We understand that we can't always say more, more, more. Because so many automakers are increasing production, suppliers have to pick and choose where to make an investment," he explained.

This instance highlights the need for companies to engage in suitable supplier risk management, assessing where there are possibilities production could be hit if components are not as readily available.

Content team, Bureau van Dijk

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