TROY, MICH. (Oct. 7, 1 p.m. ET) — The auto industry has been a global business for a long time. This year has made it clear just how much a problem in just one of those regions, however, can affect everyone in the product chain.
The clearest lesson came in March, when the double disasters of earthquake and tsunami in Japan killed thousands and also impacted manufacturing for weeks. Japanese carmakers were not directly hit by either event, but power fluctuations prompted them — and their suppliers — to shut down.
Those supplier shut downs then rippled throughout the auto industry as companies based in North America began running out of vital Japanese-made parts.
But that was not the only issue carmakers faced, said Al Gier, director of global risk management for General Motors Co., during a discussion at the Society of Plastics Engineers Automotive Polyolefins Conference in Troy Oct. 2-5.
There were floods in the northeastern United States that disrupted shipping and tornados throughout the Midwestern U.S. — including one that damaged Toyoda Gosei North America Corp.'s Hopkinsville, Ky., plant, among other sites.
“We've got to go back to the 1950s to find another year with the impact on the economy in terms of natural disasters for this year,” Gier said. “By the halfway point in 2011, we were already on pace to pass 2005, and that's the year of [Hurricane] Katrina.”
Disasters can also come in smaller versions when it comes to supply chain interruptions. A March 2 fire extensively damaged Magna International Inc.'s molding plant in Howell, Mich., forcing the company to scramble to make sure it could get parts to customers without forcing those customers to shut down. The company had the plant back at 80 percent of capacity within a week.
A difficult year like 2011 makes clear just how tightly the global industry relies on just-in-time delivery, and how quickly those supply chains can be broken, he said.
Following this year, automakers will be looking at production security in new ways, Gier said.
A new resin, for instance, needs to be available from multiple sites so that no one is reliant on just one location.
“You have to globally be able to source [material],” said George Halow, global cockpit and trim chief engineer for Dearborn, Mich.-based Ford Motor Co.
Halow added that carmakers can help smooth out issues of material availability by cleaning up their own material specifications requirements, so the same resin is accepted in both China and the U.S. for similar parts.
Automakers like Detroit-based GM and its suppliers will also be reconsidering just how much stock they should have on hand for a buffer even thought they rely on precise just-in-time delivery systems.
Gier noted that statistics point out the potential for an even bigger disaster year to come, and he urged suppliers to be prepared. That does not mean setting up scenarios for a specific crises, he said, but rather that companies really understand the complete supply chain so they know where they are vulnerable and can react quickly.
“You need to look beyond your Tier 1 and Tier 2 suppliers, because a Tier 4 can affect you more than you realize,” he said.