Probing dark corners of a complex supply chain
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Last year's disaster in Japan taught automakers around the world that damage to just one supplier could disrupt global operations. Now they're trying to make sure it doesn't happen again.
For instance, Renesas Electronics Corp. lost its Naka microcontroller plant in northeast Japan. Renesas produced 41 percent of the world's automotive microcontrollers, and the Naka plant alone accounted for 25 percent of the company's global production. When production stopped at Naka, assembly plants in North America, Europe and elsewhere were crippled.
Automakers and major suppliers discovered quickly that in many cases they knew little about the thousands of downstream companies that feed them parts through a complicated supply chain.
So automakers and suppliers started taking the following steps to limit future disruptions:
-- Take a census of key second-, third- and fourth-tier suppliers.
Robert Young, purchasing chief for Toyota Engineering & Manufacturing North America, acknowledged that Toyota had trouble after the earthquake identifying sub-suppliers that produced key parts.
Other automakers are in the same boat.
-- Ask suppliers to plan dual production locations for key parts. In some cases, two plants might make a key part. In others, a factory might simply be designated as a backup.
-- Conduct a risk assessment of each supplier to gauge the likelihood of floods, earthquakes, hurricanes or political upheaval.
-- Ask certain suppliers to stockpile key components. Last year Nissan Motor Co. had fewer production disruptions than Honda Motor Co. or Toyota Motor Corp. because it had stockpiled microprocessors, which were in short supply even before the earthquake.
While automakers seek more information about their supply chains, some suppliers may be reluctant to share a list of their vendors.
Neil De Koker, president of the Original Equipment Suppliers Association, said late last year that suppliers view the data as their intellectual property and that some suppliers fear automakers might use the information to demand price cuts.
You can reach David Sedgwick at dsedgwick@crain.com.
