Building a stronger UK automotive supply chain
11 February 2013
With a resurgent UK automotive sector, now is the time to invest and innovate, says Schaeffler UK’s head of automotive, Richard Hall. The UK automotive sector is hugely important to the UK economy, employing more than 700,000 people and investing over £1.5bn in R&D every year. The strength and capability of the automotive supply chain is a critical factor in driving growth and attracting inward investment.
According to the SMMT (Society of Motor Manufacturers & Traders), around a quarter of automotive companies in the UK are Tier 1 suppliers supplying directly into UK-based OEMs, and 42 percent are Tier 2. Over the last two years OEMs have pledged more than £6bn of investment in the UK automotive market generating huge growth opportunities across the UK supply chain.
A recent survey carried out by the Department for Business, Innovation and Skills has revealed that UK-based OEMs want to source £3bn worth of product from UK suppliers. With the UK being such a high producer of engines, it’s hardly surprising that a high proportion of this figure relates to commodities for the engine such as castings, forgings and accessories.
So why are UK-based engine manufacturers now looking to localise component suppliers? Ford, for example, produced over 1.7 million engines at its Bridgend and Dagenham plants in 2011 out of a UK production total of 2.5 million.
First, it is critical that these companies manage their supply chain inventories and the deliveries of engine components to their UK engine plants. For example, in the case of Ford, having a tappet production plant located just 20 miles from its Bridgend engine plant, means that it can take delivery of graded engine tappets in smaller batches and more frequently, as and when it requires them, with far less supply chain risk than if it had to import these components from the Far East or South America.
Also, with unforeseen natural disasters such as floods in Thailand or the Tsunami in Japan, security of supply is also now a critical factor in supply chain decision-making. Engine manufacturers also have to consider how volatile a supplier’s exchange rate is for a particular engine component. Using local suppliers can help to smooth out any of these unforeseen currency fluctuations.
This growing interest and commitment from global vehicle manufacturers to source more components in the UK is being supported by the Automotive Council and the SMMT, which has set up and hosted six separate ‘Meet the Buyer’ events since 2010. These networking events are designed to match OEM-sourcing demand with local UK suppliers.
According to the SMMT, in 2011 these events facilitated more than 400 one-to-one meetings between vehicle manufacturers and UK Tier 1 and 2 suppliers, covering more than 80 different automotive commodities. Feedback has indicated that the events are popular and successful, with the majority of companies attending having received at least one positive lead to follow up after the events.
As a manufacturer of high precision mechanical tappets for internal combustion engines, my own company is reaping the benefits of this inward investment by the OEMs. It recognised some years ago that it needed to invest in its UK production plant in order to support the major vehicle OEMs, investing heavily in new capital equipment for its plant in Llanelli, South Wales in 2011 and 2012.
The company committed several million Euros in new surface coating technology for tappets, as well as a massive 66-tonne deep drawing press, which enables the plant to produce highly repeatable, superior quality mechanical tappets and other automotive engine components for OEMs.
This investment will see Ford being supplied with over 20 million low friction tappets per year if required. These tappets are already helping Ford to improve the fuel efficiency of its engines and to minimise CO2 emissions, particularly evident on Ford’s new Ecoboost gasoline range, such as the three-cylinder 1.0 Ecoboost engine, which was recently named ‘International Engine of the Year’.
By working in close partnership with vehicle manufacturers, suppliers can react much faster and can quickly identify new business opportunities. By having a resident engineer close to the customer, the supplier gains a deeper understanding of new, relevant R&D projects. Knowing what a vehicle manufacturer is working on now and in the near future is priceless information.
This could help to generate more business in the form of more projects, which in turn leads to increased growth and security of jobs for the supplier. This increased business can then cascade down the supply chain to lower tier suppliers, ultimately resulting in benefits for UK plc as a whole. Of course, this close working also benefits the vehicle manufacturer since they can tap into the supplier’s knowledge by quickly accessing the relevant areas of expertise within the organisation through the resident engineer.
Richard Hall is head of Schaeffler UK's Automotive Division
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