NEW YORK –North American Operations’ top executive says the turmoil battering global suppliers and auto makers following the March 11 earthquake and tsunami in Japan could have a permanent impact on supply-chain management.
Many auto makers have been forced to cease production or alter build schedules as key suppliers fail to deliver a steady stream of parts.
“I think the supply base in general will reassess logistics and sourcing patterns,” MNAO CEO and President Jim O'Sullivan tells Ward’s at the New York auto show. “Anytime you have a situation like this you always learn.”
Hiroshima-basedavoided direct damage but temporarily ceased production as a result of the natural disaster’s impact on the supply sector. The auto maker now is ramping up output at its Hiroshima and Hofu assembly plants.
O’Sullivan says suppliers and OEMs alike will have to re-evaluate their sourcing strategies, so they have a “pretty good logistics manufacturing footprint globally.” That way, “if situations like this develop again, we (will) have a good backstop.”
Having a supply base that can shift production quickly from one factory to another would be ideal, but the reality is much more complicated.
“If you have one plant and it’s very profitable and efficient, duplicating that plant and having all that extra cost doesn’t necessarily make sense,” O’Sullivan says.
The decision to maintain redundant facilities largely hinges on how unique the part is, he says.
Many of the Japanese suppliers affected by the tsunami produce high-tech components, such as microchips, that are purchased by auto makers worldwide. Shortages of such parts have had a widespread impact.
O’Sullivan says Mazda, while not yet greatly affected by parts shortages, is closely monitoring the situation. “We are experiencing, like the rest of the industry, what’s happening in terms of the overall supply base. The big question for us is the unknown.”
Although a potential parts shortage could creep up at any second, O’Sullivan says MNAO is in a good position to serve its customers with plenty of stock on the ground following an uptick in production prior to the tsunami.
Mazda’s U.S. vehicle days’ supply at the end of March was 62. Auto makers generally consider a 60 days’ supply ideal.
Due to the brief shutdown of its two Japanese plants, Mazda has told its North American dealers any vehicle ordered but not yet built is being canceled. Vehicles that are being shipped to North America will be evenly distributed to dealers, O’Sullivan says.
“We ended up cancelling those orders, because we might not have been be able to build exactly to those specifications,” he says. “As (vehicles) come into port, we want to make sure dealers are equitably treated in terms of product.”