Auto industry suppliers provide risk management lesson
Recession is time to think about alternative sources
By Susan Avery -- Purchasing, 6/17/2009 10:15:00 AM
Buyers who single source or depend upon one supplier for parts and components may want to consider in this down economy selecting a secondary source or developing a supplier relationship management (SRM) program if they haven’t done so already.
So says Jon Bovit, vice president of marketing and strategy at CVM Solutions, a provider of risk management analysis and tools in Chicago. Bovit spoke with Purchasing.com about findings of analysis the company did recently on automotive suppliers that provide parts and components to companies in industries other than automotive/transportation. CVM conducted the analysis in response to customer request for the information.
The CVM analysis focused on six large auto suppliers—Lear, American Axle & Manufacturing, Metaldyne, Visteon, Contech and Hayes Lemmerz International. Its goals:
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First, CVM wanted to identify which CVM customers are potentially impacted by these suppliers becoming high risk. The company defines high-risk suppliers as having a significant probability of failure to some aspect of their business within 12 months.
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The second goal was to identify which other industries are impacted by these and other auto suppliers becoming high risk.
From its analysis CVM identified 43 of its customers across 21 different industries that are impacted by the suppliers.
The CVM analysis shows that these six suppliers have greater potential impact outside of the auto industry than within it: A total of nine CVM customers in the automotive/transportation industry are impacted by the six suppliers versus 34 CVM customers outside of the industry. As a result, the six auto suppliers are nearly four times more likely to impact an industry outside auto then inside.
“I was surprised at the impact outside of the auto industry,” Bovit said in the interview with Purchasing.com. He suggested that purchasing professionals in general may want to think about alternative sources and “staying in closer touch with suppliers” to be able to better detect early warning indicators if they haven’t done so already.
Ten of the industries impacted by the six auto suppliers identified by CVM Solutions are:
1. Automotive/transportation
2. Business services
3. Discount, variety stores
4. Diversified electronics
5. Education/non-profit
6. Electronic test and measurement Instruments
7. Energy/utilities, oil and gas
8. Farm and construction machinery
9. Financial services
10. Healthcare/pharmaceutical
See also: ISM 2009: Supplier consolidation may lead to increased risk
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