Tuesday, April 27, 2010

Supply Chain Design and Supplier Development

In 1985, Michael Porter, introduced in his book ‘The Competitive Advantage’ the concept of the Value Chain. He suggested that activities within the organisation add value to the service and products that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive advantage.

Several mergers and acquisitions (M&E) in the components side of the auto industry
during the second half of the 1990s are attributed as reactions to the earlier increased buying power of the OEMs. Driven by the industry’s ongoing need to consolidate, the so-called ‘‘merger mania’’ rose to fever pitch between 1998 and 2000, with 30 major deals worth $58.4 billion to $30.2 billion alone in 1999, the pinnacle of the trend (Brooke 2001). As a result, one report in fact predicted a substantial decline in both the number of Tier 1 (from 600 in 2000 to 30 in 2010) and Tier 2 (from 10,000 in 2000 to 800 in 2010) (Bingham 2001) suppliers. The ownership of the parts manufacturers was consequently fused together into new global companies with significant technological and innovation capabilities. At the same time, the OEMs divested their components and sub-systems divisions in an effort to tap into the non-OEM automotive markets.


These developments intensified the OEMs’ move to...