While Ford Motor Co. is not saying who it has invited to set up shop at its planned Chicago supplier park, executives from parts makers privately say they have been getting the calls, and they are weighing the possibilities.
For companies with extensive experience in Europe, the centralized supply parks are a routine way of doing business. Smaller molders, though, are facing new questions.
One supplier to receive an early invitation to come to Chicago already has turned it down. It simply does not make economic sense for him, he says. Too many expenses related to setting up an independent shop for one customer. Too many complications — for deliveries, for transportation, for labor. He is not the only one to reject the request. Others repeat the same concerns, but also add they are leery of being among the first supply park tenants in North America, worried of being a corporate guinea pig.
Supplier parks aren't right for every company. If you're getting less than $10 for each component you make, and if they are easy to ship, then it makes no sense to be wooed into a park, even if one of the world's biggest manufacturers is calling you by name. For others, it is not such an easy decision.
For every benefit, there is a flip side. Supplier parks offer close contact to customers that is hard to match, but the Chicago site still sits a half-mile outside the assembly plant gates with no direct delivery system, meaning parts makers will have to pack and ship components.
Sitting closer geographically may open the prospect to do more systems integration, which can add value to the parts and earn more money for each piece. But sometimes added-value means more costs and complications.
Going into an automaker's park can link a supplier directly to a successful vehicle model, or force it to spend millions to ramp up production for a car that never meets expectations.
A central manufacturing base can mean access to a large, highly trained work force, but the cost to hire from that labor pool may swamp small companies.
There is no one standard answer for companies considering an opportunity in supplier parks. Even in Europe, the rules for parks vary from site to site.
Carmakers are constantly tweaking the concept, and most times the solutions they find are designed to benefit themselves — not the suppliers. That is why, one parts maker noted, some opportunities have lingered on the table for years, with no takers from the supply field.
Supplier parks are coming to North America, though, along with other cost-cutting initiatives first launched in Europe. But do not forget the basic rules of business. A park location is not a magical solution to leveraging customer loyalty. Nor is it a system solely designed to stifle molders' profits.
Supplier parks are a tool, and the same rules of evaluating business opportunities apply, balancing risks and rewards. Suppliers have had to follow their customers for years, traveling into new markets when the time is right. A new term, and new location, do not change the basic business math.
“It's the big companies that drag the little companies around with it,” one European executive says. “It always has been.”
Viewpoint writer Rhoda Miel is a Plastics News reporter based in Detroit.