Steering automotive supply chains to success


Interview Vendor trends


These macro-electronic and technological trends are driving changes at both the car makers and their suppliers.


The rapid pace of consumer electronics development is forcing car makers to shrink their model lifecycles. Otherwise, as Smit says, “when you get into a five-year-old car you can immediately feel that it is old.”


The car makers are responding by investing in research, development and engineering resources, as well as forecasting, so that they can take more of the key technology decisions in house. The Tier One automotive customers are responding in similar fashion, focusing on R&D and sales and marketing support. And so the relationships among the four players in the industry triangle described above have evolved.


Car makers now consult with the component manufacturers on technology, with the Tier One automotive customers on a business basis, and then rely on distributors such as Avnet to understand and deliver what they need in terms of the quality of supply processes, global consistency, and the right information, material and financial flows.


A lot of the outsourcing that has taken place as car makers and their Tier One automotive customers focus on their differentiating value has been enabled by the availability of standards. But in rapidly developing areas such as vehicle autonomy there are, as yet, no standards. For example, there is no standard dashboard symbology for engaging cruise control, and so Avnet has to understand and work with the pre-standardisation approaches of multiple car makers.


14 Distributor trends


Distributors are finding themselves at the sharp end of other major market trends. One of these is the industry’s gradual shift from making cars to providing mobility. It’s not at all clear whether in the future cars will be bought by individuals, by car-sharing companies, or even a new breed of mobility-provision platforms.


A second trend is the possibility of new market entrants from non-traditional sources. The most obvious sign of this is in the rise of entirely new vehicle brands, especially in the electric vehicle market in China. Less obviously, companies such as Uber, Google and Apple may use their strengths in connectivity and software to enter the car market, treating the vehicle itself as a sub-assembly to be contracted out to trusted partners.


A third trend is the increasing complexity of supply chains. Existing component manufacturers continue to diversify the geographical base of their operations, making it more challenging to align supply logistics and quality globally. At the same time, as the Tier One automotive customers continue to strengthen their focus on R&D, marketing and sales, new players, such as the electronic manufacturing services companies, are stepping in to take the burden of manufacturing off their shoulders.


Outsourcing is not a riskless strategy, though – your supplier can always mess up – so car makers are looking for multiple forms of redundancy, using multiple Tier One automotive customers to produce key modules, which have been designed to allow some level of component substitution.


“Obviously, we need to build supply chains for these players,” says Smit.


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