When supply chain makes two enemies good friends

Filed in archive Market Overview on December 10, 2008

One very interesting article I saw recently in Herald Tribune which has been highlighted by a number of blogs is one which talks about the dynamics of automotive supply chain (You can read the article here)

The basic takeaway I had from that was the following: Even though Asian companies like Toyota or Honda are competitors of BIG 3 in the U.S., they don't like to see their failure. The reason is simple: Because many of the suppliers for automakers are the same and if one of them goes down, at least in the short term the extra cost of not being able to achieve optimum economies of scales will go back to Asian car makers.

So as you see the supplier structure and dynamics of relationships between end-product producers and the supplier base make enemies good fiends. I have seen the similar thing in the High Tech where companies like Intel are making components for many PC sellers.

What has happened in high tech area is that the players in the supply chain have tried to help each other both in terms of process improvements and collaboration but also financially for creating capabilities which they require. I'm not sure whether the same thing will happen in auto sector or not so we have to wait and see