By 2018 Harbour Results, Inc. anticipates a vendor tooling capacity constraint within the automotive industry, according to its 2013 Vendor Tooling Study. In approximately five years, the required capacity of the vendor tooling industry will reach $15.2 billion, with available current supply of only $9.25 billion. Vendor tooling – tooling purchased by the original equipment manufacturer (OEM) to be run in Tier 1 or Tier 2 facilities – is a crucial part of the automotive industry and the vehicle development process, accounting for an average of $550 per vehicle in North America at 2012 vehicle volume. This capacity issue affects the entire value stream from vendor tooling suppliers to Tier 1 suppliers and OEMs.
"Capacity will become a serious challenge for the automotive industry in the near future. If the North American tooling industry doesn't respond to the challenge someone, such as European and Asian tooling suppliers, will," said Laurie Harbour, president and CEO of Harbour Results, Inc. "Our study, in partnership with the Original Equipment Suppliers Association (OESA), addresses potential issues that we'll face and provides several strategies to counteract industry changes."
The study – which gathered information from 10 OEMs, nearly 50 major Tier 1 suppliers and more than 50 global tooling suppliers – identifies several factors that will contribute to the demand increase, including:
- Mass customization
- Increased complexity
- Europe and Asian OEM tool localization to North America
- Increased vehicle content
- Labor shortage
- Increased price pressure
To solve the imminent capacity issue, OEMs, Tier 1 and tooling suppliers must revisit current strategies throughout the entire value stream. Key strategies for reducing the capacity discrepancy identified in the study are: early collaboration, focus on cost (as opposed to price) and management of the value stream.
According to Harbour, the industry would see a 10 to 20 percent reduction in absolute tool costs if there is more collaboration between OEMs, Tier 1 and tooling suppliers as early as 36 months before vehicle launch. Increased collaboration leads to improved manufacturing feasibility, increased input on part design, improved understanding of supplier capabilities and more.
"Modifying processes throughout the vendor tooling value stream will not only improve tooling cost, but, more importantly, improve capacity needed to offset the impending constraint. OEMs, Tier 1 and tooling suppliers will need to work together to create more efficient practices and reduce wastes throughout the entire process, from planning through to development, kick-off, production and beyond to address the entire capacity gap," said Harbour. "The solutions identified in our study will help reduce the risks that will come with the capacity challenges we'll see in the near future."
Today, the industry is focused on the increased price pressures and the price of tools, rather than the cost created throughout the entire tooling value stream. OEMs are utilizing a number of different tactics to lower the price of tools and services, including adjustment of payment terms and low-cost country sourcing.
"Seeking lower prices, especially with low-cost countries, is not the answer. The advantage gap for countries like China has been shrinking and will continue to shrink. China is still an option for tools, but high complexity, critical tools will stay here. If the focus does not shift to managing costs, the industry will face incredible challenges as capacity grows in this region," added Harbour.