Auto makers take supply chain risk management seriously

Filed in archive Market Overview on January 30, 2008

On interesting blog which I read recently was on the topic risk management in supply chains which highlighted the increasing importance of this issue, especially in sectors which cost factor and has a major role:

The blog was about the US car industry, which is taking an extremely proactive approach to dealing with the problem of risk in the supply chain.

Last week Honda announced that it had spent 35 per cent less with distressed suppliers in 2007 than it had done in the previous 12 months. Its rationale? Identifying suppliers who could potentially hit choppy waters before placing orders, allows the company to direct their efforts elsewhere without worrying about production delays and other complications.

It's a no-nonsense approach that seems to be serving the automotive industry particularly well during a time when bankruptcy rates among auto-parts suppliers are soaring.

Bo Andersson, General Motor's group vice president of global purchasing and supply chain, recently claimed that GM had also spent less on distressed suppliers in 2007. "We are much more proactive," Andersson said, adding: "We try to assist suppliers before it's too late."



Following the trend, Ford has also stated its intention to trim its supply base over the coming months.

However, as Honda, and their competitors, go through supplier balance sheets with a fine toothcomb before making increasingly difficult decisions, others will doubtless be taking a more relaxed approach - one that they may live to regret.

(Note: The blog was posted on European Leaders in Procurement)