Executive Says Asian Disasters Won't Spur Supply Chain Shakeup

Auto giants won’t make wholesale changes to their supply chains despite natural disasters in Asia causing global reprucussions on output, said a DHL executive.

However, there will be more focus on contingency plans and supplier risk management strategies in future, said Bill Olver, vice president of DHL’s Asia Pacific supply chain logistics & automotive division.

“This is capital intensive industry — model life is 5-10 years — so you can’t just switch suppliers,” he said. “They’ve chosen production locations for economic reasons and that won’t change because of natural disasters. But the manufacturers will reflect on what has happened and how they do things.”

The Japanese earthquake and tsunami in March and flooding in Thailand this year has forced major car manufacturers, such as Honda, Nissan and Toyota, to suspend or reduce output at plants around the world due to critical part shortages.

Some of Japan’s auto giants have suggested that supplies of core components could be diversified or entire lines moved into countries such as Vietnam and Indonesia. Although the impact of natural disasters had been severe in the short-term, Olver said manufacturers would eventually take a long view and analyze in more detail their supply chain risk strategies and those of their suppliers.

“Some automotive makers have said they didn’t understand how some tier two, three, four suppliers were so important globally for them so they will look to understand where there risks are in terms of global supply,” he added. “So maybe we will see more dual supply systems and more checks on supplier contingency plans.

“But it’s such a competitive market, price is so important and they need economy of scale, so there won’t be a wholesale change.”

Availability of some cars in the U.S. and elsewhere is expected to be disrupted into next year because parts of Thailand are still flooded and need rebuilding.

-- Contact Mike King at michael@borderline.eu.com