TRAVERSE CITY, MICH. - After a decade of wrenching change, automakers and suppliers arepushing harder than ever to radically reshape supply and purchasing operations. And as the industry moves toward a global manufacturing base connected by powerful computer networks, the rate of change is picking up speed.
Much of what passes for the purchasing function in the auto-motive industry, traditionally handled by large and powerful staff organizations, will give way to smaller, interdisciplinary groups using new processes and computer tools to design and buy automotive parts, predicted Michael F. Doyle, a Laingsburg, Mich.-based consultant to supplier firms and original equipment manufacturer purchasing organizations.
``The days of three bids and a cloud of dust are over,'' he said.
Doyle and other analysts specializing in purchasing and supply operations outlined the rapidly changing nature of OEM-supplier relationships at the University of Michigan Management Briefings Seminars, an Aug. 7-11 automotive conference held in Traverse City.
Automakers, eager to shed overhead expenses, are asking larger suppliers to take on more research and development, design, production and purchasing functions. These larger suppliers, or systems integrators as they are called, must also learn how to manage subsuppliers.
``Sourcing and project management decisions at these lower links of the value-chain are critical, yet this activity remains poorly understood and underreported,'' Doyle said.
In the next decade, the number of suppliers that describe themselves as primarily systems integrators will increase from 13 percent to 35 percent of the total, according to preliminary results from a new survey from EDS Management Consulting Services and the University of Michigan.
The number of direct suppliers, or those that supply materials, parts and services directly to assembly operations, will decline from 70 percent of the total to 41 percent, the survey said. At the same time, the ranks of indirect or subsuppliers will increase from 16 percent of the total to 25 percent.
All that change will create enormous opportunities for suppliers, said John Waraniak, a principal with EDS Management Consulting in Southfield, Mich.
``Our actions right now are crucial,'' he said in a speech during the Traverse City conference. ``What any one company does during this time will most likely determine its course for the entire length of the next [in-dustry] life cycle.''
The EDS and University of Michigan study, to be completed in early 1996, also asked OEM and supplier companies to rate global market opportunities in the near term. Overall, respondents said, the United States will remain the most attractive location to manufacture vehicles in North America during the next decade.
Outside North America, respondents to the survey ranked China as the most attractive market to produce and sell vehicles and parts. Other strong contenders were Brazil, Germany and Japan. South Korea also fared well in the survey, ranking ahead of all European markets except for Germany.
For the automotive industry, the sometimes ``explosive and erratic'' growth in the world economy, falling trade barriers and regional free trade pacts, are altering global competition ``to an extent that we truly don't appreciate now,'' said James A. Mateyka, a vice president of A.T. Kearny Inc. in Alexandria, Va.
``The last decade of the 20th century will probably be viewed by historians as laying the foundations for true globalization,'' he said.
One of the most critical areas for improvement among auto-makers and suppliers is in purchased materials, Mateyka said.
``This element dominates the cost structure of the vehicle builders and the Tier 1 suppliers,'' he said, in reference to larger parts makers.
As trade barriers continue to fall, global sourcing of materials will yield big savings, Mateyka predicted.
A typical savings represented by global sourcing amounts to 10 percent or more in purchased materials ``landed'' costs, he said.
On the product development front, A.T. Kearny has conducted studies that reveal potential efficiency savings of 30 percent to 40 percent. That, Mateyka said, indicates a competitive opportunity for automakers and suppliers that can close the productivity gap.
Still, as automakers push larger suppliers to handle more of the job of designing and building cars and trucks, and as they ask suppliers to follow them into emerging markets all over the world, a certain uneasiness has crept into their thinking.
Vehicle manufacturers are beginning to ask themselves about the risk of ``excessive dependence'' on a few, powerful suppliers.
``We're now starting to hear those words,'' Mateyka said.
