Risk Management in Supply Chains

The “world cars” of today are manufactured in multiple factories across several continents, and this increasingly international, globalised form of production is having an ever stronger effect on supply chains in the automotive industry, leading to an extremely strong growth in the levels both of complexity and efficiency in the process. The logistics of supplying these worldwide works is a challenge for any manufacturer, and although existing concepts such as just-in-time and just-in-sequence facilitate a high supply chain efficiency, they also greatly increase the vulnerability of global supply chains. For this reason, risk management in the supply chain has long been part of the standard toolkit of original equipment manufacturers (OEMs), who examine suppliers (tier 1) not only on their technical but also on their financial performance. In many cases, OEMs apply principles of dual or multi-sourcing to get the same parts from two or more suppliers and ensure supply even if one of the manufacturers contracted is no longer able to keep up deliveries. On closer analysis, the holes in even this strategy become clear when the suppliers’ suppliers (tier 2) is examined, and in this article, we will be looking at an example of this issue with explosive potential: the concentration of semi-conductor manufacturing for Automotive at a small number of manufacturers – in some cases, at only one.