Wednesday 14th Nov 2018 - Logistics & Supply Chain

30% ceiling on far sourcing

The sourcing of automotive components from China and other distant low-cost-countries is unlikely to exceed 30 per cent, say leading figures from the automotive logistics industry. Although there has been much talk about outsourcing the bulk of component production to countries such as India and China, the reality may be less dramatic. ‘We think most sourcing will remain relatively local,’ says Jim Moore, vice president of Ryder System, speaking at the Automotive Logistics Europe conference in Montreux.

Christian Zbylut, chief executive of Gefco, agrees. ‘The increase in distance and complexity and the reduction of supply chain reliability mean that purchasing savings can easily be offset by supply chain management costs,’ he says. ‘Our belief is that a maximum of 30 per cent content will be considered for intercontinental sourcing.’

Moore says although the costs of the components themselves are lower in countries with low labour and infrastructure costs, the increased logistics and supply chain management costs would undermine these savings.

‘There’s always a competitive tension between component sourcing and logistics sourcing,’ he says. To emphasise this point, he uses the example of China. ‘It can cost more for inland transport from the factory to the port in China than the cost of shipping from China to the US,’ he adds. The automotive industry’s lean inbound supply chains mean that, as an industry, it is intolerant to any interruption in supplies. A paucity of infrastructure in many low- cost countries makes it difficult to provide the levels of dependability that can be offered by better established and more local suppliers. As well as this, Zyblut highlighted the increased transit times, management costs and stock levels that are required when sourcing parts over greater distances.

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