Building a stronger UK automotive supply chain
With a resurgent UK automotive sector, now is the time to invest and innovate, says Richard Hall, President Automotive for Schaeffler UK, an engine, transmission and chassis components and systems supplier.
The UK automotive sector is hugely important to the UK economy, employing more than 700,000 people and investing over £1.5 billion in R&D every year. The strength and capability of the automotive supply chain is a critical factor in driving growth and attracting inward investment.
According to the SMMT (Society of Motor Manufacturers & Traders), around a quarter of automotive companies in the UK are Tier 1 suppliers supplying directly into UK-based OEMs, and 42% are Tier 2. Over the last two years OEMs have pledged more than £6 billion of investment in the UK automotive market generating huge growth opportunities across the UK supply chain. A recent survey carried out by the Department for Business, Innovation and Skills has revealed that UK-based OEMs want to source £3 billion worth of product from UK suppliers. With the UK being such a high producer of engines, it’s hardly surprising that a high proportion of this figure relates to commodities for the engine such as castings, forgings and accessories.
So why are UK-based engine manufacturers now looking to localise component suppliers? Ford, for example, produced over 1.7 million engines at its Bridgend and Dagenham plants in 2011 out of a UK production total of 2.5 million. First, it is critical that these companies manage their supply chain inventories and the deliveries of engine components to their UK engine plants. For example, in the case of Ford, having Schaeffler’s tappet production plant located just 20 miles from its Bridgend engine plant, means that it can take delivery of graded engine tappets in smaller batches and more frequently, as and when it requires them, with far less supply chain risk than if it had to import these components from the Far East or South America.
Also, with unforeseen natural disasters such as floods in Thailand or the Tsunami in Japan, security of supply is also now a critical factor in supply chain decision-making. Engine manufacturers also have to consider how volatile a supplier’s exchange rate is for a particular engine component. Using local suppliers can help to smooth out any of these unforeseen currency fluctuations.
This growing interest and commitment from global vehicle manufacturers to source more components in the UK is being supported by the Automotive Council and the SMMT, which has set up and hosted six separate ‘Meet the Buyer’ events since 2010. These networking events are designed to match OEM- sourcing demand with local UK suppliers. According to the SMMT, in 2011 these events facilitated more than 400 one-to-one meetings between vehicle manufacturers and UK Tier 1 and 2 suppliers, covering more than 80 different automotive commodities. Feedback has indicated that the events are popular and successful, with the majority of companies attending having received at least one positive lead to follow up after the events.
January 14, 2013
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