ACMA, the apex body representing India’s Auto Component manufacturing industry, has unveiled a joint study by M/s JD Power Asia Pacific presenting ‘Insights into Supplier-OEM relationship: A Benchmarking Study’ The study was released by Praful Patel, Union Minister for Ministry of Heavy Industry & Public Enterprises at ACMA’s 51stAnnual Session in New Delhi.
The study aimed at understanding and analysing the relationship between the suppliers and OEMs in select markets on the basis of trust and dependability, driven by a common purpose of commercial success and business development, delineates several key parameters that suppliers need to focus upon to distinguish their performance from others. The interface study gives directions to help suppliers make better strategic decisions when dealing with the OEMs. The study, a must read for decision makers in the automotive industry, suppliers and OEMs alike, has various exciting findings about the relationship between Suppliers and OEM in the Indian domestic market benchmarked against practices in the developed markets of USA, Germany, France and the emerging market of China.
Commenting on the findings of the study, President ACMA Srivats Ram said, “The benchmarking study indicates that the industry stands to gain from deeper engagement across the industry value chain. Beyond the conventional criteria of Quality, Cost and Delivery, OEMs across the world prefer to engage with suppliers with stable lines of communication, good work culture, effective process orientation and end-customer knowledge. Further they prefer suppliers who can jointly work with the OEMs in developing products and technologies to be delivered with a global footprint. OEMs today are consolidating and looking to optimise their points of contact for efficient and effective supplier management and cost savings. Consolidation of supplier base will call for Tier-1 suppliers to continuously upgrade and even handhold the Tier-2 suppliers. This will enhance business opportunities for suppliers in the future, but will pose significant challenges, as Tier-1s will have to invest in requisite skills and resources to manage an integrated supply chain.”
“While the growth prospects of the Indian auto component industry remain very promising in the long run, there are a new set of challenges that we face as we evolve into a critical part of the global auto eco-system. For Indian suppliers, on one hand there is the need to maintain competitiveness in an inflationary environment and on the other the need to compete with the best in an increasingly uncertain global market. Strong working relationship and world-class capabilities congruent with global standards of excellence are essentials for the fast changing requirements of the customers. The study attempts to answer few questions in this context, which are critical for sustainable growth,” added Srivats.
Some Key findings of the study:
The study, an understanding of the perceptions of the OEMs and the auto component suppliers, involved detailed opinion interviews as well as response elicited through questionnaire of over 70 OEMs and suppliers in India, China, USA and Europe reveals, amongst others, the following key attributes:
• While Quality, Cost, Delivery remain critical pre-requisites that define the relationship between OEMs and their Tier-1 Suppliers, multiple key enablers are critical in defining a stronger business relationship between them.
• Akin to India, in international markets too, both suppliers and OEMs have been struggling with the shortage of skilled manpower. This needs to be addressed in an urgent manner.
• In China and India, OEMs are more focused on helping the supplier improve and grow, while in Europe; the focus is on improving supplier delivery.
• Product liability will be an area of challenge in India as we go forward. Suppliers need to focus on understanding the contractual risks, devise ways to insulate themselves and contractually manage Tier 2 & 3 suppliers in accordance. They will have to gear up to address the challenges of Product recall, warranty & part traceability.
In China, suppliers are singularly challenged to meet the demand; they are relatively less impacted by other issues.
In USA the suppliers-OEM relationship is pivoted on innovation in products and processes. Suppliers will continue to face pressure as OEMs there are likely to increase thrust on sourcing from low cost countries.
In Europe, while the forecasting of demand/ordering by OEMs is fairly streamlined, the prevalent market conditions pose immense pressure on the suppliers on all parameters of cost, quality and delivery.
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