You built the line, you ran production, you saw the problems, then you fixed them if you could. Once upon a time, you had no choice but to work with your experience in order to build out a new line to produce the product. But when setting up a new production line, inefficiencies at ramp-up are a given. On top of that, OEMs want new products delivered quickly and manufactured at the lowest possible cost. The first challenge has to do with new product introductions (NPIs), which, thanks to a consumer market looking for customized products with the latest gadgets and gizmos, are becoming commonplace requests from OEMs to Tier 1. Let’s look at a few challenges suppliers face today. OEM purchasing managers now face a choice: should they continue to work with the same Tier 1 suppliers in hopes that their vendors deliver on the new demands, or should they find new Tier 1 suppliers that can innovate? The question is: how will you, as a supplier, show innovation? OEMs need suppliers who will implement solutions to help speed up their new product introductions, lower their operational costs and improve their profit margins. This, in turn, has put pressure on their Tier 1 suppliers to do the same. OEMs must show innovation in their products and processes, or get left behind. The growing demand for configure-to-order, advancements in technology and the introduction of electric vehicles have shifted the dynamics. The landscape of the automotive industry is changing. They have built their businesses on long-term relationships with these OEMs, with whom they often jointly set cost targets and share product developments. They manufacture and supply automotive-grade parts and systems directly to the OEMs. Tier 2 suppliers are often experts in their domain, but because they also serve non-automotive customers, they do not have the ability or desire to produce automotive-grade parts.
Tier 2 suppliers buy raw materials from Tier 3 and use them to produce parts needed by Tier 1. Tier 3 form the foundation, supplying raw materials, such as metals and plastic, needed by Tier 2 and Tier 1 suppliers. The automotive supply chain can be segmented into Tier 1, Tier 2 and Tier 3 suppliers.
But because the average car is comprised of 30,000 parts, sourcing those is a colossal task in it of itself.
The name can be misleading, however, because although OEMs do produce some equipment, they tend to focus on designing cars and assembling final products, not producing parts. Called OEMs, or Original Equipment Manufacturers, they are the big-name industry titans who deliver the automobiles that we buy to the marketplace. When it comes to Automotive & Heavy Equipment Manufacturing, explaining the supply chain can get complicated.