TRAVERSE CITY, MI – Detroit auto makers should think long term when they source parts, says Michael Vitek, director of Daimler AG’s consulting arm MBtech.
“Where you source products affects you, your children, your state and your nation,” he tells attendees at the World Class Manufacturing session here, part of the Management Briefing Seminars.
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Sourcing in China to get a lower piece price not only could harm the local economy, it runs the risk of being more expensive if there are problems in the long-distance supply line.
MBtech designed a technology for tools that has resulted in acceptable geometry of parts stamped from different grades, gauges and alloys of steel, because the preferred kind of steel is not always available.
As part of that research, MBtech analyzed the risks of buying steel overseas.
Sourcing a part from China for a Michigan OEM could cost $577,000 in transportation and inventory if there was a hitch in the China source, vs. $100,000 for the same part with the same hitch from an Indiana source, located only a few states away.
“It’s a question of how much risk you are willing to accept,” Vitek says. “In some cases, it is cheaper to source in the Midwest.”
The problem is compounded because buyers often only concern themselves with the purchase of their particular part and don’t talk with buyers of other parts for the system.
The result is the total system ends up with built-in risks and costs that could have been avoided, and would have been avoided in the old days, when steel, tools, parts and validation all were done in proximity.
Management Briefing Seminars