Automotive suppliers have a lot to contend with. It’s a global industry, seeking a sophisticated supply chain, with highly competitive world-leading quality standards. But a report out this week from consultant Cap Gemini puts a new light on the causes of some of these pressures.
Using its new number-crunching industry model, it predicts that the European car industry will generate 15% less revenue in 2000 than three years ago a shortfall of nearly £20bn. And it is not just overcapacity that is to blame. The argument runs that demand for cars is a fast-moving target that’s difficult to predict, and more difficult to match with production. Pockets of overcapacity and shortage kill profitability.
Analysts conclude that to change the situation, assembly line productivity gains are really the last place to look. In fact, global alliances and product range extension can help deal with the demand-supply mismatch, while cheaper distribution channels can also reduce costs. Worryingly for automotive suppliers, the Cap Gemini team also concludes that yet more integration with suppliers to reduce inventories and increase responsiveness, reducing costs and extending design and component commonality should also be a key part of the equation.
Of course they have a point. But top suppliers, with highly sophisticated manufacturing and quality systems, already feel they are working at full tilt and seriously doubt how much further economies can be squeezed out.
The problem seems to be that the car industry persists in misreading the market, with the result that profits are hit and suppliers are once again called upon to get smarter and cheaper. But is demand for cars really so volatile that it is impossible to model accurately? The only real certainty is that when high-flying marketing department number-crunchers get it wrong, it is the engineers who are left to pick up the pieces.