Low-cost countries offer challenges, opportunities for parts manufacturers, resellers

April 13, 2016

More than 20 years ago, the campaign for auto parts manufacturing and outsourcing in low cost countries began. Many manufacturers have benefitted from lower manufacturing costs but have had to develop feasible logistics to sustain their success. With manufacturers opening the global gate, auto parts resellers also saw an opportunity and began direct importing.

Aftermarket Business World columnist Larry Silvey examines moving auto parts manufacturing off shore to low-cost countries (LCCs) or outsourcing to them in his column, The role of low cost countries for the automotive aftermarket.”

He discusses what motivated parts manufacturers in the 1990s to shift product manufacturing to LCC overseas and the costly learning curve they went through to achieve that. He also noted that the two primary reasons to shift production to LCC countries – reducing costs and meeting global market demand – also appealed to auto parts resellers. Resellers soon discovered that direct importing offered higher profit margins on lower cost products. Cost savings could be as high as 50 percent, according to the Automotive Aftermarket Suppliers Association (AASA).

The column examines all the substantial risks and new management challenges that resellers who went down this path had to face. A few of those include quality control, product liability, intellectual property protection, product recall responsibility, importer record, longer lead times, supply chain management and increased inventory costs. All of these issues can affect the total product cost and performance.

Click here to read the entire column.

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