North American automotive supplier supply chain performance study

North American
automotive supplier supply
chain performance study
Key 2013 findings from leading automotive
suppliers evaluating the effectiveness and
efficiency of their supply chain
In this issue
2
Welcome
3
Key themes
4
Supplier performance
5
Methodology
9
Scope
10 Segment findings
14 Detailed segment performance
19 Detailed survey findings
23 Implications and recommendations
24 Looking ahead
28 Gearing up for the future
29Contacts
www.pwc.com/auto
Welcome
As a means of identifying and assessing supply chain strengths and
challenges in the automotive market, PwC refreshed its annual study of
the top 50 automotive suppliers to North American Original Equipment
Manufacturers (OEMs) (ranked by sales of OEM parts).1
To enhance this year’s study, Original Equipment Suppliers Association
(OESA) provided PwC with access to their membership, gaining support
of its member companies (including 53 publically traded companies).
Through OESA distribution, we were able to analyze multiple supplier
surveys and expand the breadth of findings presented in this paper.
PwC’s study evaluates the responses of this expanded pool of players to
distill their performance on supply chain planning, sourcing and delivery
capabilities; compare supplier segments studied—Exterior, Interior,
Body, Powertrain, Electrical, and Chassis—and identify potential for
improvement. Specifically, our study provides a closer look at the ability
of top suppliers to generate revenue/cash (effectiveness), as well as their
capability to minimize costs (efficiency).
While our findings indicated that most suppliers perform better
on effectiveness than on efficiency, it is evident that all segments
can markedly improve in both areas—with Interior and Exterior
Suppliers leading the way in terms of the strongest performance and
revenue growth.
Our many thanks to all who participated in PwC’s 2013 study. We value
your time, effort and input.
Rajiv Jetli
Principal
[email protected]
+1 (313) 394 3132
“Top 100 NA Suppliers,” Automotive News, June 17th, 2013. Top 45 included in financial analysis due to five companies being private.
1
2
2013 North American Supplier Supply Chain Performance Study
Key themes: Emerging
automotive supplier findings
Supply chain efficiency and effectiveness may lead to higher financial gains:
• Based on the survey results, companies that are performing well in the five core
disciplines1 exhibit higher financial performance. For example, sales growth of bestin-class company (BICC) is almost 50% higher than that of non-BICCs, while BICCs
have 20% higher profitability than non-BICCs.
• Interior and Exterior suppliers lead the way in revenue growth as Original
Equipment Manufacturers (OEMs) continue their focus on improving interior
quality and differentiating exterior styling (e.g., unique lighting options).
• All segments appear to be taking an additional focus on Cost of Goods Sold (COGS)
once again, as supplier revenue growth has outpaced COGS growth from 2012
to 2013.
There is a renewed focus on cash:
• Working-capital efficiency appears to be a common trait of profitable suppliers.
Companies that achieved top quartile performance in gross profit margin delivered
top quartile performance in days sales outstanding (DSO) improvements and topquartile performance in raw material turns.
• Top Tier 1 suppliers are realizing the value of an extra few days of payables, with
approximately 60% of segments increasing their payables by over two days since
2011. This could be driven by a renewed focus on cash and increased leverage
through supplier consolidation.
• Segments with higher local content, such as body suppliers, appear to be achieving
working-capital benefits through improved days sales outstanding (DSO) and
shorter cash-to-cash cycles.
Inventory continues to be a challenge:
• Several segments—specifically interior and exterior components—have seen
industry turns decline as automotive production stabilizes from the 2009–2012
growth cycle.
• Improvements in raw materials stability appear to indicate that supply is catching up
with demand, allowing suppliers to stabilize their raw material inventories. Coupled
with improved forecasting and demand stability, most segments are starting to see
gains in controlling raw materials turns.
3
2013 North American Supplier Supply Chain Performance Study
The majority
of suppliers
performed
better on
effectiveness
(revenue) than
they did on
efficiency (cost)
Interior suppliers showed the greatest strides in effectiveness
this year, while body suppliers slightly declined in performance.
Exterior suppliers improved in effectiveness but regressed in
efficiency; Powertrain, Chassis and Electrical Component supplier
effectiveness declined.
More
Average
Effectiveness
Ranking
Efficiency (Costs)
Interior
Body
Powertrain
Average
Efficiency
Ranking
Electrical
Exterior
Chassis
Note: size of bubble represents avg. sales
to NA OEMs ($B)
Less
More
Effectiveness (Revenues)
Source: (1) PwC Analysis, “Top 100 NA Suppliers”, Automotive News, June 17, 2013.
Notes: Rankings were developed based on weighting of the key metrics in this study. Each segment was ranked in comparison to other segments.
Divisions between quadrants suggests cross-segment average. Dotted circles represent last year’s study results in efficiency/effectiveness.
4
2013 North American Supplier Supply Chain Performance Study
Methodology
In this year’s study, PwC identified leaders (top 20%) and laggards
(bottom 20%), and determined an effectiveness and efficiency rating
for the six supplier segments studied:
1. Exterior 4. Powertrain
2. Interior 5. Electrical
3. Body6. Chassis
Using publically available data, PwC assessed supply chain
performance by aligning 17 specific metrics to planning, sourcing,
and delivery performance. Rankings were then developed based
on the weighting of these key metrics, to derive an efficiency and
effectiveness score. The combined score determined the overall
segment level ranking. Each segment was ranked in comparison to
other segments. On the bubble chart, divisions between quadrants
suggest the cross-segment average ranking.
Two frameworks were used to help guide the analysis. First, PwC
leveraged the SCOR® reference model developed by Supply Chain
Council (SCC) to group metrics into plan, source, and delivery
buckets. The SCOR® model provides a unique framework that links
business process, metrics, best practices and technology features.
The second framework used aligns the five core disciplines
covered in PwC’s recently released book on strategic supply chain
management. Our industry survey composed of 33 questions that set
out to assess a suppliers’ supply chain capabilities. Specifically, the
core disciplines PwC surveyed each supplier on were:
Core Discipline 1: View your supply chain as a strategic asset
Core Discipline 2: Develop and end-to-end process architecture
Core Discipline 3: Design your organization for performance
Core Discipline 4: Build the right collaborative model
Core Discipline 5: Use metrics to drive supply chain performance
Using these frameworks and data analysis, PwC was able to draw
insights into suppliers supply chain effectiveness and efficiency.
5
2013 North American Supplier Supply Chain Performance Study
A combination of planning, sourcing, and delivery metrics were
used to establish supplier effectiveness and efficiency
17 metrics were used to determine supply chain efficiency and effectiveness. Effectiveness
Metrics: Raw Material Stability; Days Payables Outstanding (DPO); Days of Sales
Outstanding (DSO); and Efficiency Metrics: Cash-to-cash; and Cost of Goods Sold
(COGS) Revenue.
A combination of planning, sourcing, and delivery metrics used to establish supplier effectiveness and efficiency
Effectiveness
Metrics
(Revenue)
Efficiency
Metrics (Cost)
Planning
Sourcing
Delivery
Operating Cash Flows/
COGS (YoY)
Days Payables
Outstanding (DPO)
Days of Sales
Outstanding (DSO)
Revenue Growth
(YoY)
DPO
Improvement (YoY)
DSO
Improvement (YoY)
DPO
Improvement (Rank)
DSO
Improvement (Rank)
Raw Material Stability
Cash-to-Cash
SG&A (YoY)/
COGS (YoY)
Inventory Turns
Gross Profit Margin
Avg FG Inventory/
Revenue
Inventory Turns
Improvement (YoY)
COGS (YoY)/
Revenue (YoY)
PPE / Revenues
*Bold indicates stronger indicators of effectiveness and efficiency performance
Source: PwC’s North American Supplier Supply Chain Study, 2013
6
2013 North American Supplier Supply Chain Performance Study
The SCOR® reference model was used to guide our analysis
in Plan, Source, and Deliver capabilities
SCOR® based end-to-end model (physical, information, financial flows)
1
Plan
Supplier’s
supplier
Customer’s
customer
Supplier
Deliver
Source
Make
Customer
Deliver
2 Deliver
Make
3 Deliver
Source
Return
1
Plan
• Supply chain strategy and network design
• Cross-enterprise supply/demand planning
• Inventory management and schedule stability
Make
Deliver
Source
Return
2
Source
3
• Strategy procurement
• Supplier-managed inventory
• Purchased materials cost management
Deliver
• Demand management
• Order management and customer delivery
• Supply chain asset management
Source: PwC's North American Supplier Supply Chain Study, 2013
Plan (levels of aggregation and information sources): Activities that involve supply chain
strategy and network design; cross-enterprise supply/demand planning; and inventory
management and schedule stability.
Source (locations and products): Activities related to strategic procurement;
supplier-managed inventory; and purchased-materials cost management.
Deliver (channels, inventory deployment and products): Capabilities that cover
demand management; order management and customer delivery; and supply-chain
asset management.
7
2013 North American Supplier Supply Chain Performance Study
Our study focused on the five core disciplines covered in the recently released
book on strategic supply chain management, co-authored by PwC
The five disciplines for top performance
1. View SC as a
strategic asset
2. Develop an end-to-end
process architecture
5. Use metrics to drive
supply chain performance
3. Design your organization
for performance
4. Build the right
collaborative model
Notes: Joseph Roussel, a partner in PwC's Strategy and Operations practice, co-authored the Strategic Supply Chain Management book.
8
2013 North American Supplier Supply Chain Performance Study
Scope
A total of 103 suppliers were studied this year, including 53 OESA public companies and the
top 50 suppliers to North American OEMs ranked by OEM sales. The graphic below depicts
the supplier population characteristics and demographics.
The study covers a broad range
of automotive suppliers
Geographic distribution (HQ location)
South America
1%
Company size
Sector breakout
Greater than $15B
33%
Less than $5B
47%
Powertrain
24%
Asia
36%
Europe
17%
North America
46%
Body
5%
Between $5–$10B
14%
Between
$10–$15B
6%
Electrical/
Electronics
20%
Exterior
14%
Interior
14%
Chassis
23%
Source: PwC’s North American Supplier Supply Chain Study, 2013
Supplier population characteristics:
• Body suppliers—class A stamping, non-/structural stampings, frame/subframe
components, body hardware
• Chassis suppliers—axles, exhaust, suspension, steering wheels, brakes, bearings,
4WD components, fuel tanks
• Electrical component suppliers—airbag/controller, antilock braking system
(ABS), harnesses, heating, ventilation, and air conditioning (HVAC), entertainment,
control modules, regulators
• Interior suppliers—seats, seat belts, interior products, instrument panels (IPs),
trim, carpet, headlines, HVAC
• Exterior suppliers—glass, paint, body molding, fascias, lamps, mirrors, wiper
systems, door handles, seals
• Powertrain suppliers—electric vehicle (EV) batteries/drive controls, engines,
transmissions, 5C components, pistons, heads, cooling and air management,
injectors, turbochargers, tubes and hoses
9
2013 North American Supplier Supply Chain Performance Study
Segment findings—Interior
suppliers now lead all segments
Interior suppliers now lead all segments, having achieved median revenue growth of 4%.
The segment continues its strong performance in working capital management, as evidenced
by strong performance in current year and year-over-year (YoY) improvement in inventory
turns, days payables outstanding (DPO), and cash-to-cash performance. That said,
below-average DSO performance indicates an opportunity still exists to further improve
cash-to-cash efficiency. At the same time, strong revenue growth and above-average gross
margin improvement indicate that fundamentals are on the upswing.
• Effectiveness: Interior suppliers achieved top performance in revenue growth across
all segments. Demonstrating superior control of internal working capital, interior
suppliers ranked tops in DPO. DSO performance was 0.6 days higher than average
for all segments, indicating a slight opportunity to further improve
cash-to-cash performance. Additionally, lagging performance in operating cash
flow/COGS evidences underperformance in some combination of gross margin,
investment (depreciation), and/or overall tax rate.
• Efficiency: Interior suppliers achieved top performance in inventory turns and in
cash-to-cash cycle. YoY performance in inventory turns climbed from fourth place
in 2012 to second place in 2013. Gross profit climbed from fifth to fourth place,
suggesting that slight improvements in pricing or COGS have been achieved.
Interior suppliers are in fourth place in YoY SG&A/YoY COGS, suggesting further
improvement in SG&A costs may be warranted.
SC effectiveness measures
Overall
1st
Operating Cash Revenue
Flows/COGS
Growth
(YoY)
6
1 (tie)
SC efficiency measures
Days Payables Days Payables Days of Sales
Outstanding
Outstanding
Outstanding
(DPO)
(YoY)
(DSO)
1 (tie)
1
4
Overall
Days of Sales
Outstanding
(YoY)
3
1st
Raw Material Inventory
Stability
Turns
2
1
Inventory
Turns YoY
2
Cash-toCash
2
Gross Profit
Margin
4
COGS
Growth/
Revenue
Growth
3
YoY SGA/
YoY COGS
4
Body suppliers placed second. Body segment suppliers appeared to be performing
very well in both supply chain effectiveness and efficiency, having scored first in three
effectiveness measures and three efficiency measures. Given that body suppliers ranked first
in operating cash flows, DSO, YoY DSO improvements, raw material stability, inventory turns
and cash-to-cash, it appears that working capital was a heavy focus from 2012 to 2013. Poor
gross profit margins, revenue growth, and COGS growth relative to revenue growth suggests
that additional efficiency and effectiveness opportunities remain.
10
2013 North American Supplier Supply Chain Performance Study
• Effectiveness: With median revenues growth performance of 0.3% YoY, Body
suppliers rank fifth in revenue growth. Leaders achieve 4% growth in revenues,
while laggards shrank revenue by -4.4% revenue growth. With its leading cash-tocash and DSO performance, it appears that Body suppliers tend to be very good at
getting cash back into the company. From 2012 to 2013, Body suppliers have grown
DSO performance by 3%, suggesting better payment terms and a leading focus on
working capital.
• Efficiency: Body suppliers have segment-leading raw material stability—potentially
enabled by high local content and a renewed focus on raw material turns and
controls. They rank first in inventory turns YoY performance, having improved by
0.4%. In fact, the Body segment was the only one to improve YoY turn performance.
However, of the entire population, Body suppliers saw the lowest gross profit margin
in 2013. This—coupled with poor COGS performance relative to revenue growth—
suggests additional efficiency improvement opportunities.
SC effectiveness measures
Overall
2nd
Operating Cash Revenue
Growth
Flows/COGS
(YoY)
1
5
SC efficiency measures
Days Payables Days Payables Days of Sales
Outstanding
Outstanding
Outstanding
(DSO)
(YoY)
(DPO)
6
4
1
Overall
Days of Sales
Outstanding
(YoY)
1
2nd
Raw Material Inventory
Turns
Stability
1
3
Inventory
Turns YoY
1
Cash-toCash
1
Gross Profit
Margin
6
COGS
Growth/
Revenue
Growth
4
YoY SGA/
YoY COGS
6
Chassis suppliers came in third. Chassis suppliers ranked fourth in
effectiveness and third in efficiency, with middle-of-the-road performance in all
measures. Poor gross margins and COGS growth relative to revenues suggest
opportunities in cost reductions and efficiency gains and/or pricing pressures
from OEMs. Lagging performance in DSO, average DPO improvements, and
poor inventory performance indicates that the Chassis suppliers segment
requires greater focus on cash-to-cash and working capital performance.
• Effectiveness: Chassis suppliers show middle-of-the-road performance
in most effectiveness measures. Poor DPO performance suggests that
opportunities exist in supplier payment terms. Median revenue growth
of 3.5%, coupled with poor gross profit margins, suggests payment terms
could be a near-term opportunity.
• Efficiency: When compared to other segments, Chassis suppliers seem
to have achieved one of the highest performances in inventory turns in
2013. However, the segment seems to be trending downward, ranking
only fifth in YoY performance or 2013, and the Chassis supplier segment
ranked among the lowest in gross profit margin (15.9%) relative to
other segments.
SC effectiveness measures
Overall
4th
Operating Cash Revenue
Flows/COGS
Growth
(YoY)
4
3
SC efficiency measures
Days Payables Days Payables Days of Sales
Outstanding
Outstanding
Outstanding
(DPO)
(YoY)
(DSO)
5
3
3
Overall
Days of Sales
Outstanding
(YoY)
3
3rd
11
Raw Material Inventory
Stability
Turns
3
2
Inventory
Turns YoY
5
Cash-toCash
3
Gross Profit
Margin
5
COGS
Growth/
Revenue
Growth
4
YoY SGA/
YoY COGS
2
2013 North American Supplier Supply Chain Performance Study
Exterior suppliers ranked fourth. Top performance in revenue growth
indicates that OEMs are placing a strong demand for innovation and
differentiation on Exterior suppliers. High COGS growth relative to revenues
threatens to push gross margins to below average. Low raw-material
stability may evidence the need for improved planning techniques and
supplier management, while low inventory turns offset good DPO and
DSO performance—resulting in only a fifth place ranking in cash-to-cash
cycle performance.
• Effectiveness: Exterior suppliers tied for top performance in revenue
growth across all segments. Good control of DSO and YoY DSO
improvements earned them second place in these two measures. Good
DPO performance achieved first place ranking, but poor improvement
threatens future performance. Lagging performance in operating cash
flows/COGS (YoY) and low inventory turns evidences the segment’s
declining ability to generate cash from operations.
• Efficiency: Top performance in YoY SG&A/YoY COGS may be driven by
high COGS growth rather than good control of SG&A expenses. Low raw
material stability could be driven by changing product designs, supply
constraints, or volatile customer demand—indicating the need for robust
and responsive planning and collaboration tools. Low inventory turns
drive a long cash-to-cash cycle. If this is combined with short product life
cycles, this may indicate the need for safeguards against obsolescence.
SC effectiveness measures
Overall
3rd
Operating Cash Revenue
Flows/COGS
Growth
(YoY)
5
1 (tie)
SC efficiency measures
Days Payables Days Payables Days of Sales
Outstanding
Outstanding
Outstanding
(DPO)
(YoY)
(DSO)
1 (tie)
6
2
Overall
Days of Sales
Outstanding
(YoY)
2
5th
Raw Material Inventory
Stability
Turns
6
4
Inventory
Turns YoY
3
Cash-toCash
5
Gross Profit
Margin
3
COGS
Growth/
Revenue
Growth
6
YoY SGA/
YoY COGS
1
Powertrain suppliers finished in fifth place. Powertrain suppliers ranked
fourth overall in efficiency measures and last in effectiveness. Poor cash-to-cash
cycle performance is being driven by low inventory turns and poor performance
on receivables. The segment’s focus on cost control has driven it to second overall
gross margin performance, while top performance in COGS growth and revenue
growth indicates a continuing focus on controlling COGS. Low revenue growth
and high working capital levels indicate a need to focus on cash-to-cash and
working capital performance.
• Effectiveness: Across all segments, Powertrain suppliers have bottom
performance in revenue growth. The segment shows slightly longer
median DPO by 0.8 days, but the 80th percentile performers extend
payment 8.8 days longer than other segments. There is a need to improve
inventory velocity, as evidenced by poor inventory turns and poor YoY
improvement. Bottom performance in DSO and YoY DSO improvement
shows lack of focus or lack of leverage.
• Efficiency: Powertrain suppliers are achieving good gross margins by
controlling COGS. Low inventory turnover and high DSO result in a
cash-to-cash cycle that is 40% higher than the best-performing segments.
Lagging performance in YoY SG&A/YoY COGS indicates that SGA costs
are not being held in check as well as in other segments.
12
2013 North American Supplier Supply Chain Performance Study
SC effectiveness measures
Overall
6th
Operating Cash Revenue
Flows/COGS
Growth
(YoY)
3
6
SC efficiency measures
Days Payables Days Payables Days of Sales
Outstanding
Outstanding
Outstanding
(DPO)
(YoY)
(DSO)
3
2
6
Overall
Days of Sales
Outstanding
(YoY)
6
4th
Raw Material Inventory
Stability
Turns
4
6
Inventory
Turns YoY
4
Cash-toCash
4
Gross Profit
Margin
2
COGS
Growth/
Revenue
Growth
1
YoY SGA/
YoY COGS
5
Electric Component suppliers finished sixth. This segment is trailing the pack.
That said, Electrical Component suppliers ranked first in gross profit margins,
suggesting low raw-material components costs, significant low-cost labor content
and lower-than-average total landed costs. Lower-than-average raw material
stability could be the result of longer-than-average supply chains. Lowest
performance in cash-to-cash and inventory turns suggest opportunities exist in
both working capital and inventory management.
• Effectiveness: Managing free cash appears to be important, as revenue
growth is below average. DSO performance ranking is among the lowest
of all segments, with the band between leading performance of 51 days
and lagging performance of 72 days being among the largest.
• Efficiency: Inventory turns ranked low when compared across segments,
and the lowest YoY improvements suggest opportunities in inventory.
COGS growth relative to revenue growth appears favorable, suggesting
that Electrical Component suppliers have focused on COGS control and
cost reductions.
SC effectiveness measures
Overall
5th
Operating Cash Revenue
Flows/COGS
Growth
(YoY)
2
4
SC efficiency measures
Days Payables Days Payables Days of Sales
Outstanding
Outstanding
Outstanding
(DPO)
(YoY)
(DSO)
4
5
5
Overall
Days of Sales
Outstanding
(YoY)
5
6th
13
Raw Material Inventory
Stability
Turns
4
5
Inventory
Turns YoY
6
Cash-toCash
6
Gross Profit
Margin
1
COGS
Growth/
Revenue
Growth
2
YoY SGA/
YoY COGS
3
2013 North American Supplier Supply Chain Performance Study
Detailed segment performance
PwC’s key findings from the segment analysis include:
• Revenue Growth performance: Interior and Exterior suppliers lead
the way in median revenue growth, with the largest spread seen in
Powertrain. Leaders (top 80%) show 10–11% YoY performance.
• Days Payables Outstanding (YoY) performance: Interior suppliers
had the highest median YoY performance in Days Payable Outstanding,
suggest that improvements in DPO could have been a focus within the
segment. Exterior suppliers had the largest spread between leaders
and laggards.
• Days Sales Outstanding (YoY) performance: Body suppliers had the
highest improvement in Days Sales Outstanding, suggesting that DSO
improved by 2.7% from the previous year.
• Inventory Turns performance: Interior suppliers turn over inventory
faster than other segments, and nearly 60% faster than Powertrain
suppliers. Interior leaders turn their inventory nearly 16 times.
• Cash-to-Cash performance: Body suppliers had the shortest
cash-to-cash cycle, while Electronic Component suppliers have the
highest spread between leader and laggard performance.
• COGS growth (YoY) relative to revenue growth (YoY): Powertrain
suppliers appear to have controlled COGS relative to revenue growth
compared to other segments. Powertrain COGS grew at 90.7% of
revenues, suggesting that COGS improvement initiatives or controls are
becoming more important.
• Raw Materials Stability performance: Body suppliers had the best
performance in raw material stability, indicating that the fluctuation
between high and low raw material turns throughout the year is minimal
when compared to the other segments. Best raw material stability
performance could indicate that improved planning capabilities or better
raw-material inventory supply and/or controls are in place.
• Inventory Turns improvement (YoY): Body suppliers were the only
segment that improved inventory turns this year. All other segments saw
a decline in inventory turns from last years study.
14
2013 North American Supplier Supply Chain Performance Study
2013 Median Revenue Growth (YoY) performance (includes Leader/Laggard(2) band)
Revenue Growth [%]
15%
10%
5%
0%
4.0%
3.5%
0.3%
4.0%
1.4%
0.1%
Leader
Median
Laggard
-5%
-10%
-15%
Body
Chassis
Powertrain
Elec Comp
Interior
Exterior
Source: Public data from CapIQ, PwC Analysis.
Notes: (1) Revenue growth: Defined as the growth from 2012 to 2013 revenue as a percentage of 2012—(2) Leaders defined as top 80th percentile,
laggards as bottom 20th percentile.
2013 Median Days Payables Outstanding Improvement (YoY) (includes Leader/Laggard(2) band)
Days Payable Outstanding YoY [∆%]
15%
10%
5%
0%
2.9%
-2.0%
2.8%
2.8%
0.1%
-0.3%
Leader
Median
-5%
Laggard
-10%
-15%
-20%
Exterior
Elec Comp
Interior
Chassis
Powertrain
Body
Source: Public data from CapIQ, PwC Analysis.
Notes: (1) Days Payables Outstanding Improvement (YoY): Defined as the change in DPO from 2012 to 2013, as a percentage of 2012—(2) Leaders
defined as top 80th percentile, laggards as bottom 20th percentile.
15
2013 North American Supplier Supply Chain Performance Study
2013 Median Days Sales Outstanding Improvement (YoY) (includes Leader/Laggard(2) band)
Days Sales Outstanding YoY [∆%]
20%
15%
10%
5%
0%
Laggard
0.3%
0.0%
-2.4%
-2.4%
-2.6%
Median
-2.7%
-5%
Leader
-10%
-15%
-20%
Elec Comp
Interior
Exterior
Chassis
Powertrain
Body
Source: Public data from CapIQ, PwC Analysis.
Notes: (1) Days Sales Outstanding Improvement (YoY): Defined as the change in DSO from 2012 to 2013, as a percentage of 2012—(2) Leaders
defined as top 80th percentile, laggards as bottom 20th percentile.
2013 Median Inventory Turns Improvement (YoY) (includes Leader/Laggard(2) band)
Inventory Turns YoY [∆%]
40%
30%
20%
Leader
Median
10%
0%
Laggard
0.4%
-4.2%
-3.1%
-5.1%
-5.8%
-4.2%
-10%
-20%
Body
Powertrain
Chassis
Interior
Elec Comp
Exterior
Source: Public data from CapIQ, PwC Analysis.
Notes: (1) Inventory Turns Improvement (YoY): Defined as the change in inventory turns from 2012 to 2013, as a percentage of 2012—(2) Leaders
defined as top 80th percentile, laggards as bottom 20th percentile.
16
2013 North American Supplier Supply Chain Performance Study
2013 Median Cash to Cash performance (includes Leader/Laggard(2) band)
Cash to Cash [days]
100
80
Laggard
60
Median
42.3
40
20
37.1
36.3
24.2
Leader
28.1
24.4
0
Body
Interior
Powertrain
Elec Comp
Chassis
Exterior
Source: Public data from CapIQ, PwC Analysis.
Notes: (1) Cash to Cash: The time it takes for cash to flow back into a company after it has been spent for raw materials—calculated as (inventory days
of supply + days sales outstanding—days payable outstanding). (2) Leaders defined as top 80th percentile, laggards as bottom 20th percentile.
2013 Median COGS Growth (YoY) relative to Revenue Growth (YoY)
(includes Leader/Laggard(2) band)
COGS YoY/Revenue YoY [∆%]
160%
140%
120%
100%
95.6%
90.7%
95.6%
93.6%
93.6%
95.6%
Laggard
80%
Median
60%
Leader
40%
20%
0%
Body
Powertrain
Exterior
Interior
Elec Comp
Chassis
Source: Public data from CapIQ, PwC Analysis.
Notes: (1) COGS improvement (YoY) relative to revenue growth (YoY): The ratio of COGS growth from 2012 to 2013 to revenue growth from 2012 to 2013.
(2) Leaders defined as top 80th percentile, laggards as bottom 20th percentile.
17
2013 North American Supplier Supply Chain Performance Study
2013 Median Raw Materials Stability performance (includes Leader/Laggard(2) band)
Raw Material Stability [%]
60%
50%
40%
Laggard
30%
Median
Leader
20%
15.7%
15.2%
15.2%
11.4%
10%
14.7%
10.8%
0%
Exterior
Elec Comp
Interior
Powertrain
Body
Chassis
Source: Public data from CapIQ, PwC Analysis.
Notes: (1) Raw Material Stability: Defined as the Max Quarterly Raw Material Turns minus the Quarterly Min in a given year divided by the average
Quarterly turns for the year. (2) Leaders defined as top 80th percentile, laggards as bottom 20th percentile.
2013 Median Inventory Turns Improvement (YoY) (includes Leader/Laggard(2) band)
Inventory Turns YoY [∆%]
40%
30%
20%
Leader
Median
10%
0%
Laggard
0.4%
-4.2%
-3.1%
-5.1%
-5.8%
-4.2%
-10%
-20%
Body
Powertrain
Chassis
Interior
Elec Comp
Exterior
Source: Public data from CapIQ, PwC Analysis.
Notes: (1) Inventory Turns Improvement (YoY): Defined as the change in inventory turns from 2012 to 2013, as a percentage of 2012—(2) Leaders
defined as top 80th percentile, laggards as bottom 20th percentile.
18
2013 North American Supplier Supply Chain Performance Study
Detailed survey findings
As a result of the participation of OESA members, we were able to expand the
distribution of our survey, which went out to a broad range of key automotive
executives across the six segments.
The initial responses helped shed light on how participants view the five key
core disciplines for achieving top supply chain performance. It is our belief that
strong performance in these five core disciplines will further drive supply chain
efficiency and effectiveness.
Core Discipline 1: Viewing the organization’s
supply chain as a strategic asset
Although, virtually all respondents agreed/strongly agreed their supply chain
strategy is aligned with the business strategy, 33% agreed/strongly agreed that
investments in supply chain are not given the same importance as those for other
business functions.
Our Supply Chain is viewed as a strategic asset and is
an integral component to my company’s growth strategy
8%
Our Supply Chain is perceived as a means for achieving
strategic objectives and differentiates us from our competition
8%
Supply Chain improvements and investments are viewed on equal
footing as product development & sales and marketing initiatives
8%
42%
8%
58%
17%
Our Supply Chain strategy is: Aligned with our business’ strategy
25%
75%
8%
67%
8%
Neither Agree nor Disagree
8%
25%
25%
8%
67%
0%
Disagree
42%
17%
Our Supply Chain strategy is: Adaptive based on
our competitive advantage and market conditions
Strongly Disagree
25%
75%
Our Supply Chain strategy is: Aligned with customer’s needs
Our company is well situated to meet
our cost, quality, and delivery objectives
50%
20%
Agree
40%
25%
60%
80%
100%
Strongly Agree
Source: PwC’s North American Supplier Supply Chain Study, 2013
19
2013 North American Supplier Supply Chain Performance Study
Core Discipline 2: Developing an end-to-end process architecture
73% of survey responses strongly agreed there is an inadequate investment in
demand and capacity tools, potentially leading to a lack of a clear transparent
planning process.
Our Supply Chain architecture ensures the right resources and tools
are in place to meet profitability, growth, and working capital targets
25%
Our planning process is structured and drives collaboration
between sales, product management, operations, leadership,
customers, and suppliers
8%
42%
Our sourcing process strives to achieve lowest total
cost of ownership by considering factors other than landed cost
17%
8%
8%
33%
33%
8%
8%
Our demand planning horizon is sufficient for our company
to adequately plan the supply chain
8%
8%
25%
33%
33%
33%
8%
18%
8%
20%
Agree
40%
9%
8%
75%
0%
Neither Agree nor Disagree
8%
25%
73%
Our company plans our capacity activities
based on our customer forecasts
17%
50%
25%
Our company adequately invests in demand
and capacity planning tools systems
Disagree
17%
33%
42%
Our manufacturing process is integrated with suppliers
so that we can adapt to late changes without endangering
commitments to other customers
We leverage our purchasing across the enterprise,
using globalcommodity teams, common specs,
and standardized vendor evaluation criteria
25%
58%
There is a single demand plan transparent to operations, customers,
and suppliers; and it drives supply, inventory, and financial planning
Strongly Disagree
67%
60%
80%
100%
Strongly Agree
Source: 2013 Supplier Supply Chain Performance Study—PwC and OESA Survey Responses
Core Discipline 3: Designing the supply chain for performance
When it comes to having the right supply chain talent in place, 42% of
respondents disagreed/strongly disagreed that their companies have the right
resources, while 33% said that their organization did not have a management
structure that manages the end-to-end process.
Our company outsources non-strategic activities but
retains global control over core strategic functions
8%
8%
Our company has deployed a management structure
that manages the end-to-end processes of
Plan, Source, Make, Deliver, Return, and Enable
58%
33%
Our Supply Chain structure
would be described as “centralized”
8%
We have sufficient Supply Chain talent to execute
our strategic initiatives within timing requirements
Strongly Disagree
Disagree
25%
25%
Neither Agree nor Disagree
33%
33%
17%
0%
25%
25%
20%
Agree
25%
25%
40%
8%
8%
33%
60%
80%
100%
Strongly Agree
Source: PwC’s North American Supplier Supply Chain Study, 2013
20
2013 North American Supplier Supply Chain Performance Study
For respondents, most supply chain functions are classified as strategic
Plan
Source
Make
Deliver
Return
8%
Enable
17%
33%
42%
42%
58%
58%
67%
92%
100%
Strategic
83%
Non-Strategic
Source: PwC’s North American Supplier Supply Chain Study, 2013
Core Discipline 4: Building the right collaborative model
Over 40% of respondents agreed/strongly agreed that their companies should
pursue opportunities to better utilize resources and improve unit costs through
horizontal collaboration, i.e., sharing supply chain assets for mutual benefits.
Our value chain partners clearly know our core competencies
and allow us to maximize our focus and profitability
17%
33%
We use analytics to help define our collaborative
relationship with our partners
42%
We have a cooperative relationship with our partners,
meaning we share information on purchase commitments,
forecasts, inventory availability, purchase order and delivery status
We actively pursue opportunities for “horizontal collaboration” with
competitors to improve utilization or resources and reduce unit costs
Disagree
Neither Agree nor Disagree
25%
17%
58%
33%
33%
17%
20%
17%
17%
25%
Agree
25%
33%
8%
0%
Strongly Disagree
17%
17%
We have a synchronized relationship between our partners,
meaning our relationships extend beyond
Supply Chain to focus on achieving a shared vision of the future
We include key suppliers in our product development process to
improve our product designs through reduced cost and complexity,
improved manufacturability, reduced packaging and distribution costs
50%
25%
17%
40%
17%
17%
17%
60%
25%
80%
100%
Strongly Agree
Source: PwC’s North American Supplier Supply Chain Study, 2013
21
2013 North American Supplier Supply Chain Performance Study
Core Discipline 5: Using metrics to drive supply chain performance
As for metrics, 25%–42% of respondents agreed that their companies could do a
better job in terms of both internal and customer-facing supply chain metrics.
We have a balanced scorecard that considers
the four perspectives of performance: financial, customer,
internal process, and workforce learning & growth
We use a balanced set of metrics to measure our overall
Supply Chain performance, making sure that efforts to improve
one area do not have a negative impact in other areas
We balance customer-facing metrics such as perfect order
fulfillment and upside Supply Chain flexibility, with internal
metrics such as total cost-to-serve and cash-to-cash cycle time
33%
25%
We do a good job measuring our suppliers’ on-time delivery
Strongly Disagree
Disagree
Neither Agree nor Disagree
50%
17%
42%
8%
25%
8%
25%
25%
0%
25%
17%
42%
We use layered metrics to provide insight into root
cause issues affecting the performance of higher level metrics
We have validated which Supply Chain performance attributes are
important to our customers and we use performance measures
that are consistent and aligned with customer expectations
We benchmark our performance against external companies
to understand where we have opportunities for improvement
and develop a roadmap to close the gap
33%
Agree
8%
42%
25%
25%
8%
67%
17%
50%
42%
33%
20%
8%
40%
60%
80%
100%
Strongly Agree
Source: PwC’s North American Supplier Supply Chain Study, 2013
After conducting extensive research, PwC has concluded that supply
chains can be a strategic asset used to drive financial performance—and
this conclusion spans across all industries. Yet we see that supply chains
are under-valued by many companies. Across industries, only 45% of
companies view their supply chain as a strategic asset, and only 9% say
that their supply chain is helping them to outperform their peers.1
For automotive suppliers, making improvements in these five core
disciplines is likely to positively impact the organization’s performance
within the segments and across the industry as a whole. Indeed, it is the
key to gaining a competitive edge—thereby fueling current and future
financial well-being.
1
Source: PwC’s 2013 Global Supply Chain Survey, Base 12.
22
2013 North American Supplier Supply Chain Performance Study
Implications and
recommendations
Clearly, the global supply chain network is intricate. That said, when a supplier’s
in-house and external supply chain specialists collaborate to identify issues and
then plan and implement solutions designed to improve overall performance, a
supplier can reap significant efficiency and effectiveness benefits. To that end,
there are five implications to consider:
High supply chain costs. Poor improvements in raw-material turns and YoY
COGS could lead in turn to poor forecast accuracy, increased expediting costs,
higher inventory holding costs, reduced operations productivity and high supply
chain costs.
Inventory above entitlement. Suppliers with poor inventory turns tie up
scarce working capital for longer than necessary, thereby limiting their ability to
employ short-term capital for future investments and carry inventory above the
required entitlement.
Lack of customer responsiveness. Poor planning and efficiency performance
suggests limited opportunities for securing a competitive advantage through
shared cost savings, customer incentives, and on-time delivery.
Limited supply chain flexibility. Slower inventory performance, coupled
with minimal reductions in COGS relative to revenue growth, suggests limited
flexibility of a supply chain to react to increases in customer demand or
significant changes in market conditions.
23
2013 North American Supplier Supply Chain Performance Study
The road
ahead
Today’s companies still face barriers on the road to longterm growth; however, we believe the automotive sector
is on an upward trajectory, revving up now to drive
future growth. PwC’s Autofacts expects the industry to
add 25 million units of production between 2013 and
2020, for a compounded annual growth rate of 3.9%.
Automotive, along with the world at large, is changing at
a fast pace. Never before has evolution occurred in such
short periods of time. We see five emerging megatrends
combining their collective pervasiveness to impact
and influence the future of M&A activity--discussed in
the following pages, and each of which, along with its
corresponding considerations, has the potential to drive
M&A activity for global sector participants—ranging
from raw material procurement to final assembly.
Looking
ahead
To stay ahead of the pace of change and remain relevant
We have observed several emerging global megatrends
in today’s ultra-competitive marketplace, companies
that are collectively impacting automotive companies
must
collaborate
across thea automotive
network
the world
over—creating
“perfect storm”
that to
will
anticipate
any
roadblocks
on
the
horizon
and
plan in
undoubtedly influence the future of the industry.
advance
how
to topple them.
Inthese
all likelihood,
the
Following
is abest
“big-picture”
view of
megatrends,
strategies
from these
collaborative
along withemerging
their potential
implications
on theplanning
sessions
willsupply
involvechain.
M&A transactions.
PwC has
automotive
With these megatrends
identified
Megatrends
we believethat
willsuppliers
impact the
in mind, itfive
is even
more paramount
future
of the
automotive
industrysupply
over the
next
decade.
continue
to focus
on improving
chain
efficiency
and effectiveness.
Demographics shifts
surges in
in population
population
Recent surges
expected to
to slow,
slow,except
except
are expected
where growth
growthremains
remains
Africa where
prolific. Median
Median age
ageby
byregion
region
prolific.
Demographic
continues to
to rise
rise allowing
allowingfor
for
continues
shifts
more drivers.
drivers. Income
Incomeequality
equality
more
has grown
grown in
in over
over75%
75%of
of
has
Organization
for
Economic
Organization for Economic
Co-operation and
andDevelopment
Development
Co-operation
(OECD) countries, including
(OECD) countries, including many emerging markets.
Proportion of the world population aged 60 years or more
25%
20%
21%
15%
5%
many emerging markets.
Automotive implications
Supply chain implications
On all fronts, young workers will change the
• To adapt to changes and expectations of younger
organizational structure and labor practices of many
customers, agile and responsive supply chains will
employers, requiring more flexibility and incentives to
likely be required.
attract and retain “millennials” to the industry and the
• Aging populations
in developed
economies
epicenters
in which the industry
operates.
may shift customer needs and preferences
in vehicle attributes, placing a premium on
accessibility
features and less on traditional
Driving
value
performance features.
10%
8%
10%
1950
2000
2050
Source: UN report World Population Aging 1950-2050
(1950–2050) http://www.un.org/esa/population/
http://www.un.org/esa/population/
Source: UN report, “World Population Ageing” (1950-2050)
publications/worldageing19502050/
4
24
2013 Automotive M&A Insights
2013 North American Supplier Supply Chain Performance Study
Shifts in economic power
Shifts in economic
power
Western economic dominance
power
is a relatively
recent
Western
economic
Western
economic
phenomenon,
we are now
Shifts
in
economic
dominance
is aand
relatively
Shifts
in economic
dominance
is a relatively
seeing
a
rebalancing
Shift in global
recent phenomenon, of global
power
power
Shift
in global
recent
phenomenon,
economies.
This realignment
economic
and
we are now
economic
and
we
are
now
Western
economic
is
triggering
the transition of
power
Western
economic
seeing a rebalancing
power
seeing
acountries
rebalancing
dominance
is
a
growth
from centers
dominance
is
a relatively
relatively
of global economies.
Shift
in
global
of
global
economies.
recent
phenomenon,
production
to
Shift in global
recent
phenomenon,
This realignment is
economic
This
realignment
is
and
we
are
now
consumption-oriented
economic
and
we
arethe
now
triggering
transition
power
power
triggering
the
transition
seeing
a
rebalancing
economies.
rebalancing
of growth countries fromseeing
centersa of
production to
of growth countries fromof
centers
of
production to
global
economies.
of
global
consumption-oriented economies.economies.
Supply
chain implications
consumption-oriented
economies.
This
realignment
This realignment is
is
• As vehicle demand shifts
to ascending
economies,
triggering
the
triggering
the transition
transition
Automotive implications
infrastructure
improvements
will
be required
to
Automotive
implications
of
growth
countries
from
centers
of
production
to
of
growth
countries
from centers
of production
to
Vehicle
demand
is shifting
to ascending
economies
optimize
flow
of resources
and products
in order
Vehicle
demand
is
shifting
to
ascending
economies
consumption-oriented
economies.
consumption-oriented
– a trend the industry iseconomies.
already addressing with
to achieve
a moreislocalized
(and nationalistic)
– a trend
the industry
already addressing
with
an increased
focus
on
emerging
markets as mature
supply chain.
an
increased
focus
on
emerging
markets
as
mature
Automotive
implications
Automotive
implications
territories
concurrently
near a saturation point.
territories
concurrently
near
saturationeconomies
point. to
Vehicle
demand
is
to
Vehicle
demand
is shifting
shifting
to
ascending
economies
•
Given
the
global
shift
ofaascending
design-and-build
–– a
trend
the
industry
is
already
addressing
with
a trend
the industry
is already
addressing
with
ascending
economies,
the center
of the
industry
an
increased
focus
on
emerging
markets
as
mature
could
move
to
Asia.
(Approximately
18%
of global
an increased focus on emerging markets as mature
territories
concurrently
near
a
saturation
point.
vehicle
sales
now
take
place
in
North
America,
territories concurrently near a saturation point.
versus Asia, where over 50% occur.)
• As market growth concentrates in developing
markets, new competition will continue to
surface. Cost pressures will likely drive innovative
solutions that do not follow the patterns
established by the “traditional” auto suppliers.
Accelerating
Accelerating
urbanization
urbanization
Currently, 50% of the world’s
Currently,
50%urbanization
of the world’s
Accelerating
population
lives in cities; by
Accelerating
Accelerating
population lives in cities; by
2030,
the UN
projects
4.9
Accelerating
urbanization
Currently,
50%
of thethat
world’s
urbanization
2030, the UN
projects
that
4.9
Accelerating
urbanization
billion
people
will
be
urban
population
lives
inthe
by
urbanization
billion people
will
becities;
urban
Currently,
50%
of
world’s
Currently,
50%
of
the
world’s
dwellers.
2015,
the United
2030,
theBy
UN
projects
that
4.9
dwellers. By
2015,
the United
population
lives
in
by
population
lives
in cities;
cities;
by
Nationspeople
(UN)
estimates
that
billion
will
be urban
Nations
(UN)
estimatesthat
that4.9
2030,
the
UN
projects
Accelerating
2030,
the
UN
projects
4.9
Accelerating
there will
be
mega-cities
dwellers.
By22
2015,
thethat
United
urbanization
there will
be 22
mega-cities
billion
people
will
be
urban
urbanization
billion
people
will
be
urban
Nations
(UN)over
estimates
that
(populations
10 million),
(populations
over 10
million),
dwellers.
By 2015,
the
United
dwellers.
the
United
thereeconomies.
willBy
be2015,
22 Infrastructure
mega-cities
with 17 located in developing
with 17 located in developing
economies.
Infrastructure
Nations
(UN) estimates
that
Nations
estimates
that
(populations
over
10 million),
will be strained, where new
cities(UN)
will rise
rapidly
and
will be strained, where new
cities
will
rise
rapidly
and
there
will
be
22
mega-cities
there
will
be
22
mega-cities
with 17 located
in developing
require investments to accommodate
growth.
require investments to accommodate
growth.
(populations
over
10
million),
(populations
over
10
million),
economies. Infrastructure
with
17
located
in
developing
economies.
Infrastructure
with
17strained,
located
inwhere
developing
economies.
Infrastructure
will
be
new cities
will rise
rapidly and
Automotive
implications
Automotive
implications
will
be
strained,
where
new
cities
will
rise
rapidly
and
require
investments
to
accommodate
growth.
will
be
strained,
where
new
cities
will
rise
rapidly
and
Technology and innovation will be of utmost importance
Technology
and innovation
will be of growth.
utmost importance
require
investments
to
accommodate
require
investments
to
accommodate
growth.
as private and public transportation models adjust to
as
private
and public
transportation models adjust to
Supply
chain
implications
new mobility
needs.
Connectivity, including vehicle to
new
mobility
needs.
Connectivity,
including vehicle
Automotive
implications
•
Increasing
concentration
populations
will to
Automotive
implications
vehicle
and traffic
managementofsystems,
will require
vehicle
and
traffic
management
systems,
will
require
Technology
and
innovation
will
be
of
utmost
importance
increase
theinnovation
focus oninvestments
pollution
Technology
and
will be of and
utmost
importance
significant
infrastructure
to facilitate
new
significant
infrastructure
investmentsmodels
to facilitate
new
as
private
and
public
transportation
adjust
to
clean-vehicle
technologies.
as
private
and
public
transportation
models
adjust
to
transportation networks.
transportation
networks.
new
mobility
needs.
Connectivity,
including
vehicle
new mobility needs. Connectivity, including vehicle to
to
vehicle
vehicle and
and traffic
traffic management
management systems,
systems, will
will require
require
significant
significant infrastructure
infrastructure investments
investments to
to facilitate
facilitate new
new
Driving
value
transportation
networks.
transportation
networks.
Driving value
value
Driving
Driving value
Gross Domestic Product (GDP) of G7 and E7 countries at
Gross Domestic Product (GDP) of G7 and E7 countries at
$US Purchasing Power Parity (PPP)
$US Purchasing Power Parity (PPP)
2009
2009
Gross
Gross Domestic
Domestic Product
Product (GDP)
(GDP) of
of G7
G7 and
and E7
E7 countries
countries at
at
$US
Purchasing
Power
Parity
(PPP)
trillionPower
GDP Parity (PPP)
$US $29.0
Purchasing
$20.9 trillion GDP
$29.0 trillion GDP
$20.9 trillion GDP
G 7 GDP
$29.0
$29.0 trillion
trillion
G 7 GDP
E7 GDP
$20.9
$20.9 trillion
trillion
E7 GDP
2009
Group of 7 (G7):
Group
of 7 (G7):
Canada,
France,
Germany,
Canada,
France,
Italy, Japan,
UKGermany,
and US
G
Italy, Japan,
G 7 UK and US
Group of Emerging 7 (E7):
Group
of Emerging
7 (E7):
Brazil,
China,
India, Indonesia,
Brazil,
China,
India,
Mexico,
Russia
andIndonesia,
Turkey.
Mexico, Russia
E
E7 and Turkey.
Italy,
Italy, Japan,
Japan, UK
UK and
and US
US
Group
Group of
of Emerging
Emerging 7
7 (E7):
(E7):
Brazil,
Brazil, China,
China, India,
India, Indonesia,
Indonesia,
Mexico, Russia
Russia and
and Turkey.
Turkey.
Mexico,
7
7
Group
2050
Group of
of 7
7 (G7):
(G7):
2050
Canada,
Canada, France,
France, Germany,
Germany,
$138.2
$138.2
trillion
trillion
GDP
GDP
$138.2
$138.2
trillion
trillion
GDP
GDP
E7
E7
2050
$69.3
$69.3
GDP
trillion
GDP
trillion
GDP
GDP
$69.3
$69.3
G7
GDP
G
trillion
GDP
7
trillion
Canada, France, Germany,
GDP
Canada,
France,
GDPUKGermany,
Italy, Japan,
and US
Brazil, China, India, Indonesia,
Brazil,
China,
India,
Indonesia,
Mexico,
Russia
and
Turkey.
Mexico, Russia and Turkey.
Italy, Japan, UK and US
G
E
E7
7
GAnalysis.
7
Source: PwC
7
Source:
PwC
Analysis
Source:
PwC
Analysis.
Source:
PwC France,
Analysis Germany,
Canada,
Brazil,
Brazil, China,
China, India,
India, Indonesia,
Indonesia,
Mexico,
Russia
Mexico, Russia and
and Turkey.
Turkey.
Canada, France, Germany,
Italy,
Italy, Japan,
Japan, UK
UK and
and US
US
Source:
Source: PwC
PwC Analysis.
Analysis.
Source:
Source: PwC
PwC Analysis
Analysis
2015: Global megacities
2015: Global megacities
8-Megacities 2015
8-Megacities 2015
2015:
2015: Global
Global megacities
megacities
8-Megacities 2015
8-Megacities 2015
Los Angeles
Toronto
Toronto
Toronto
Toronto
Moscow
Rhine-Ruhr North
London
Los Angeles
Moscow
Rhine-Ruhr North
London
Rhine-Ruhr
Total
Rhine-Ruhr
Total
Teheran
Paris
Mexico City
Urban
Urban
population
population
Guatemala City
Los Angeles
Guatemala
City
Los Angeles
Chicago
Chicago
New York
London
London
New York
Toronto
Toronto
Toronto
Toronto
Mexico City
Mexico City
5–<8 million
5–<8 million
Guatemala City
8–<10
million
Guatemala
City
8–<10 million
Urban
Urban ≥ 10 million
population
≥ 10 million
population
Bogota
Chicago
Chicago New York
Lima New York
Abidjan
Lima
Belo Horizonte
Belo Horizonte
São Paulo
Luanda
Luanda
Rio de Janeiro
Abidjan
Abidjan
Rio de Janeiro
São Paulo
Santiago
Buenos Aires
Belo Horizonte
Buenos Aires
Belo Horizonte
5–<8 million
5–<8 million
São Paulo
Rio de Janeiro
São Paulo
million
Rio de Janeiro
Source: UN8–<10
Department
of Economic and Social Affairs.
8–<10
million
Santiago
Lahore
Delhi
Delhi
Beijing
Tianjin
Dhaka
Dhaka
Tokyo
Tokyo
Beijing
Seoul
Wuhan
Tianjin
VittagongSeoul
Wuhan
Vittagong
Shanghai
Shanghai
Hong-Kong
Riyadh
Hanoi
Shenyang
Hong-Kong Manila
Rhine-Ruhr
Calcutta
Shenyang
Pune
Istanbul
Tokyo
Rhine-Ruhr
Riyadh
Hanoi
Jidda Total
IstanbulMumbai
Tokyo
Madras
Manila
Calcutta
Lagos Total
Pune
Kabul
Beijing
Bangkok
Teheran
Bangalore
Madras
Mumbai
Kabul
Beijing
Lagos
Ho Chi Minh City
Lahore
Baghdad
Teheran
Bangkok
Tianjin
Lahore Delhi
BaghdadBangalore
Seoul
Chi Minh City
Delhi Dhaka Tianjin Ho
Seoul
Dhaka Wuhan
Kinshasa
Wuhan
Vittagong
Karachi
JakartaVittagong
Shanghai
KinshasaKarachi
Ahm
Shanghai
Bandung
Jakarta
Ahm
Hong-Kong
Bandung
Riyadh
Hanoi Hong-Kong
Jidda
Manila
Calcutta
Riyadh
Hanoi
Jidda
Pune
Manila
Calcutta
Pune
Madras
Mumbai
Lagos
Madras Bangkok
Mumbai
Lagos
Bangalore
Bangkok Ho Chi Minh City
Bangalore
Ho Chi Minh City
Ahm
Kinshasa
Kinshasa
Bogota
Santiago
Bogota
Lima
Lima
Karachi
Moscow
Ahm
Moscow
Karachi
Jidda
Paris
Paris
Shenyang
Kabul
Baghdad Kabul Lahore
Baghdad
Rhine-Ruhr North
Rhine-Ruhr North
Abidjan
Bogota
Istanbul
Teheran
Paris
Mexico City
Shenyang
Istanbul
Luanda
Luanda
Jakarta
Jakarta
Bandung
Bandung
Santiago
Source: UN Department of Economic
and Social Affairs.
Source: ≥
UN
of Economic and Social Affairs
10Department
million
10Department
million
Source: ≥
UN
of Economic and Social Affairs
Buenos Aires
Buenos Aires
Source: UN Department of Economic and Social Affairs.
Source: UN Department of Economic and Social Affairs.
Source:
Source: UN
UN Department
Department of
of Economic
Economic and
and Social
Social Affairs
Affairs
5
5
25
5
5
2013 Automotive M&A Insights
2013 Automotive M&A Insights
2013 North American Supplier Supply
Chain Performance
Study
2013
2013 Automotive
Automotive M&A
M&A Insights
Insights
• Car-sharing models and growing demand for
mass transit will place additional pressure on
aftermarket and service supply chains, forcing
supply chains to adopt more service-orientated
structures and direct-ship capabilities.
• Ever-growing urban areas and/or mega-cities
demand robust supply chains. The strength and
resilience of supply chains will be tested regarding
their ability to sustain vehicle assembly plants
and suppliers located in ever-growing urban areas
and/or mega-cities. Infrastructure will become
more congested, driving a greater need for
supply-chain efficiency and effectiveness.
Climate change
and
Climate
change
and
Climate
change
resource scarcity
resource
scarcityand
resource scarcity
With aa population
population of
of 8.3
8.3 billion
billion people
people by
by 2030,
2030, we’ll
we’ll need...
need...
With
With a population of 8.3 billion people by 2030, we’ll need...
Demandfor
forenergy
energyisis
Demand
forecasted
to
increase
Demand
for
energy
is bybyasas
forecasted to increase
much
as
50%
by
2030,
and
forecasted
to
increase
as
Climate
much as 50% by 2030,by
and
more
more
more
wateras
withdrawals
by and
40%.
Climate&
much
50%
by
2030,
more
more
more
change
water withdrawals by 40%.
energy
water
food
change
&
The impact
of this by
could
water
withdrawals
40%.
energy
water
food
resource
The impact of this could
resource
make
traditional
methods
of
scarcity
The
impact
of
this
could
make traditional methods of
scarcity
manufacturing
and
commerce
make
traditionaland
methods
of
manufacturing
commerce
difficult
or
even
impossible
manufacturing
and
commerce
difficult or even impossible in
in someor
places.
Sustainable
even
impossible
in
some places. Sustainabledifficult
solutions will
become
atatodds
solutions
will
become
odds Source: National Intelligence Council: Global Trends 2030: Alternative Worlds.
some
places.
Sustainable
solutions
will
become
at
odds
with the need for resources
to drive
growth.
Source:
National
Intelligence
Council’s
report.
“Global
2030:Worlds.
Alternative Worlds”
National
Intelligence
Council:
Global
Trends
2030:Trends
Alternative
with
the need
for resources to Source:
with the need for resources
to drive
growth.
Source:
National
Council’s report. “Global Trends 2030: Alternative Worlds”
(December
2012) Intelligence
http://www.dni.gov/files/documents/GlobalTrends_2030.pdf
drive growth.
Automotive implications
Automotive
implications
Climate change
and resource scarcity will drive Original
Supply
implications
Climatechain
change
and resource scarcity will drive Original
50%
50%
40%
40%
35%
35%
(December
2012)Intelligence
http://www.dni.gov/files/documents/GlobalTrends_2030.pdf
Source:
National
Council’s report. “Global Trends 2030: Alternative Worlds”
(December 2012) http://www.dni.gov/files/documents/GlobalTrends_2030.pdf
Equipment Manufacturers (OEMs) and suppliers
•
ClimateManufacturers
concerns and (OEMs)
resourceand
scarcity
will
Equipment
suppliers
to rethink
regional
manufacturing
distribution
continue
to push
the envelopeand
in terms
of
to
rethink
regional
manufacturing
and
distribution
strategies.
Countries
regions
will propulsion
differ in related
alternative
fuels,and
more
efficient
strategies.
Countries
and
regions
will
differtechnology
in related
regulations,
requiring
adaptability
in
both
systems, and supplier footprint considerations.
regulations, requiring adaptability in both technology
and manufacturing models.
andThe
manufacturing
models. and the maturation of
•
focus on recyclability
the automotive reverse supply chain at the end
of vehicle life will likely accelerate, along with
global expansion of the existing European End of
Life Vehicles Directive, which stipulates that 95%
of a vehicle (by weight) shall be reused/recycled,
including energy recaptured from incineration of
some materials.
Technological
Technological
breakthroughs
• Use of recycled materials
(e.g. plastics) used
breakthroughs
to manufacture interior
upholstery and other
Entirely new industries are
automotive components
will new
increase
and present
Entirely
industries
are
being created,
which could
additional supply chain
challenges.
being
created,
which
could
Technological
have a significant impact
Technological
have
significant
impact
breakthroughs
on thea size
and shape
of the
breakthroughs
on
the
size
and
shape
of the
manufacturing and highmanufacturing
and
hightech sectors. The internet,
tech
sectors.
The“big
internet,
mobile
devices,
data,”
mobile
devices,
“big
cloud computing anddata,”
other
cloud
other
breakthroughs will continue
to computing
change ourand
world,
and
breakthroughs
will
continue
to
change
our
world,
and
companies are grappling with how these factors will
companies
are
grappling
with
how
these
factors
will
affect the consumer experience – and the business
consumerthem.
experience – and the business
affect
the
models
supporting
models supporting them.
The rise of the ‘Internet of Things’
The rise of the ‘Internet of Things’
World
World
population
population
Connected
Connected
devices
devices
Connected
devices
Connected
perdevices
person
per person
6.3 billion
6.3 billion
500 million
500 million
6.8 billion
6.8 billion
12.5 billion
12.5 billion
More
More
connected
connected
devices
devices
than
than
people
0.08 people
0.08
2003
2003
1.84
1.84
2010
2010
7.2 billion
7.2 billion
25 billion
25 billion
7.6 billion
7.6 billion
50 billion
50 billion
3.47
3.47
6.58
6.58
2015
2015
2020
2020
2013 April
North
American Supplier Supply Chain Performance Study
Source: Cisco26
Internet Business Solutions Group,
2011.
Source:
Cisco
Internet
Business
Solutions Group,
April Group
2011. (IBSG) http://share.cisco.com/internet-ofSource:
Cisco’s
Internet
Business
Solutions
Source:
Cisco’s Internet Business Solutions Group (IBSG) http://share.cisco.com/internet-ofthings.html
Technological
Technological
Technological
breakthroughs
breakthroughs
breakthroughs
Entirely
new
industriesare
are
Entirelynew
newindustries
industries
are
Entirely
being
created,
which
could
beingcreated,
created,which
whichcould
could
being
have
significant
impact
Technological
Technological
haveaaasignificant
significantimpact
impact
have
the
size
and shape
shapeof
ofthe
the
breakthroughs on
breakthroughs
onthe
thesize
sizeand
andshape
on
of the
manufacturing and
manufacturingand
andhighhighmanufacturing
high-tech sectors. The
techsectors.
sectors.The
Theinternet,
internet,
tech
internet, mobile devices,
mobiledevices,
devices,“big
“bigdata,”
data,”
mobile
“big data,” cloud computing
cloudcomputing
computingand
andother
other
cloud
and other breakthroughs
breakthroughs
will
continue
to
change
our
world,
and
breakthroughs
will
continue
to
change
our
world,
and
will continue to change our world, and companies
companies
are
grappling
with
how
these
factors
will
companies
are
grappling
with
how
these
factors
will
are grappling with how these factors will affect the
affectthe
theconsumer
consumer
experience
andthe
thebusiness
business
affect
experience
––and
consumer
experience—and
the
business
models
modelssupporting
supporting
them.
models
supporting
them. them.
Automotiveimplications
implications
Automotive
Supply chain implications
Therise
riseof
ofthe
the‘Internet
‘Internetof
ofThings’
Things’
The
World
World
6.3billion
billion
population 6.3
population
Connected
Connected
500 million
devices 500 million
devices
6.8billion
billion
6.8
7.2billion
billion
7.2
7.6billion
billion
7.6
12.5billion
billion
12.5
25billion
billion
25
50billion
billion
50
More
More
connected
connected
devices
devices
than
than
people
people
Connected
Connected
devices
devices
perperson
person
per
0.08
0.08
2003
2003
1.84
1.84
2010
2010
3.47
3.47
6.58
6.58
2015
2015
2020
2020
Source:Cisco
CiscoInternet
InternetBusiness
BusinessSolutions
SolutionsGroup,
Group,April
April2011.
2011.
Source:
Source:Cisco’s
Cisco’sInternet
InternetBusiness
BusinessSolutions
SolutionsGroup
Group(IBSG)
(IBSG)http://share.cisco.com/internet-ofhttp://share.cisco.com/internet-ofSource:
things.html
things.html
OEMs and suppliers will need advanced manufacturing
OEMs and suppliers will need advanced manufacturing
•
Scalability of new technologies will become
capabilities
toleverage
leverage
globaldriving
platforms
while
still
capabilities
to
global
platforms
increasingly
important,
thewhile
needstill
for
catering
to
local
/
niche
preferences.
catering
to
local
/
niche
preferences.
revolutionary new ideas to be quickly spread
and adopted throughout the supply chain.
Source: Cisco’s Internet Business Solutions Group (IBSG) http://share.cisco.com/internet-ofthings.html
• Mass customization and 3-D printing
capabilities could continue to shorten
development cycle times.
Drivingvalue
value
Driving
66
27
Each of these global megatrends, along with its corresponding implications,
has the potential to drive supply chain activity for segment participants
worldwide. To stay ahead of the pace of change and remain relevant in today’s
ultra-competitive market, an automotive suppliers’ joint team of supply
chain specialists should revisit the organization’s supply chain strategy to
determine what it will take to anticipate and effectively respond to changes on
the horizon. In all likelihood, the strategies emerging from these collaborative
sessions will have a significant bearing on the supplier’s performance ranking
and financial well-being over the long term.
2013Automotive
AutomotiveM&A
M&AInsights
Insights
2013
2013 North American Supplier Supply Chain Performance Study
Gearing up for the future
The big question: How well is your organization’s
supply chain performing?
Drawing on study participants’ responses, we’ve distilled some key questions that
organizations should be asking themselves—and answering—as they move forward
on the road to the future.
• Do we view our supply chain as a strategic business asset that it is
integral to our future growth?
• Is our supply chain strategy aligned with our overall business strategy
and our customer’s needs? If not, then why not? And what are we doing
about it?
• Are we tuned in to the strengths and weaknesses of our supply chain? Do
we have a solid understanding of our company’s performance relative to
that of our competition?
• We live in volatile times. Is our supply chain flexible? Does it serve as a
strong foundation on which to build for the future as the environment,
marketplace, and our own business goals continue to shift over time?
• Is our organization well positioned to meet our cost, quality and delivery
objectives? If not, what needs to change?
• Do we operate within a collaborative culture that supports firm-wide
sharing of ideas for improving supply chain performance today and
sustaining it tomorrow?
• Is our in-house talent capable of navigating the supply chain maze, or
should we turn to external specialists who are involved day in and day
out—not just in the world of effective supply chain management, but
also in the issues and challenges of the automotive world?
And, perhaps the biggest question of all—Where do we begin? How do we
collaborate across the company and around the world to agree on the right
strategy, processes, tools and technology to further drive supply chain
effectiveness and efficiency? And once we know where we’re going, how do
we implement, monitor and measure success to keep our newly tuned-up
supply chain fueled for the future?
28
2013 North American Supplier Supply Chain Performance Study
Contact us
Should you have questions or comments about our study, or to explore
supply chain issues and solutions specific to your organization, please
contact any of these PwC professionals:
Rajiv Jetli
Principal
Dietmar Ostermann
Global Automotive Advisory Leader
[email protected]
+1 (313) 394 3132
[email protected]
+1 (313) 394 3220
Kevin S. Burns
Director
Michael Shaublin
Director
[email protected]
+1 (214) 754 7557
[email protected]
+1 (248) 894 4212
Brian D. Decker
US Automotive Advisory Leader
[email protected]
+1 (313) 394 6263
Acknowledgements
Our special thanks to these publication contributors: Ramesh Avula, Akshay A. Baliga, Aditya Mangal, and Carlos D. Thimann.
Additional publications of interest
• CEO Survey: Automotive Summary
• Consolidation in the Global
Automotive Supply Industry 2013
• PwC’s Autofacts Analyst Note
About PwC’s Global Automotive Management Consulting Practice
PwC’s global automotive practice leverages its extensive experience in the industry to help companies solve complex
business challenges with efficiency and quality. One of PwC’s global automotive practice’s key competitive advantages is
Autofacts®, a team of automotive industry specialists dedicated to ongoing analysis of segment trends. Autofacts provides
our team of more than 4,800 automotive professionals and our clients with data and analysis to assess implications, make
recommendations, and support decisions to compete in the global marketplace.
PwC’s automotive management consulting practice is creating a competitive advantage for its clients by changing the way
companies operate. PwC’s management consultants work with senior automotive executives to help develop and implement
innovative operational strategies that deliver breakthrough results. The practice is a leader in operational strategy, supply
chain, product development, strategic sourcing, and manufacturing. PwC has automotive resources in every automotive
market around the world. For more information, visit www.pwc.com.
Order your copy
The classic guide to
supply chain strategy,
revised and expanded
to help business leaders
gain an advantage in
today’s economy.
Order now!
365
™
PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who
are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon
the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as
to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any
liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this
publication or for any decision based on it.
© 2014 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please
see www.pwc.com/structure for further details.
DT-14-0102
All dollar amounts are expressed in US dollars, unless otherwise noted.