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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED SMMT, the ‘S’ symbol and the ‘Driving the motor industry’ brandline are trademarks of SMMT Ltd
Growing the automotive supply chain
Assessing the upstream sourcing potential
19 November 2014
Nikki Huggett, Project Manager, SMMT
Philip Davies, Automotive Analyst, Department for Business, Innovation and
Skills
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 2
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Strengthening the Upstream
Supply Chain
Supply Chain Group Update
Philip Davies BIS
SMMT Webinar
November 2014
Agenda for today
“Building consensus, addressing the challenges”
1. UK automotive – a positive story, but hidden challenges
2. Supply Chain Group overview
3. New report – “Growing the Automotive Supply Chain – Assessing the Upstream Sourcing Potential”
1. Main findings
2. Recommendations
4. Action plans and next steps – what can you do?
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 5
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Vo
lum
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mill
ion
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UK car manufacture (1970-present)
Car manufacture Forecast
UK automotive manufacturing strengthening
2017 target
2.0m
2013 results
1.5m
1972 peak
1.9m
Source: SMMT PIE data
THE SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 6
Lear Corp.
Washington
300 new jobs Nifco UK Ltd
Teesside
170 jobs
TRW Sunderland
£15m investment
Rosti McKechnie
Yorkshire 200 new jobs
Brose
Coventry
£15 million
GKN Birmingham and
Telford
£12m investment
Cab Automotive
Tipton
£1.7m investment
Stadco Telford
£45m investment
Borg Warner
Bradford
£15m investment 80
jobs
UK supply chain investing in long term future
Automotive Insulations Warwickshire 200 new jobs
• Annualised exports growing, approaching £35 billion • Annualised imports also growing, approaching £46 billion
UK automotive parts – trade balance
-8000
-7000
-6000
-5000
-4000
-3000
-2000
-1000
0
2000 2002 2004 2006 2008 2010 2012 2014
£ millions
The main contributor by value to the automotive trade deficit is the import of parts
How do we compare?
2013 Production Domestic sourcing to SMEs
Average SME size (people)
UK 1,5m 30% 30
Germany 5,4m 60% 180
Factor x3.5 x2 x6
Conclusions
• German SMEs are more stable and capable, with stronger export opportunity
What should we do?
• Increase UK production
• Source more in the UK
• Nurture and grow UK SMEs
This is the focus of the Supply Chain Group
Chaired by Dave Allen, JLR
39 members from across the UK automotive spectrum
5 workstreams:
About the Supply Chain Group
“Building consensus, addressing the challenges”
1. Quantifying and capitalising on business opportunities for the UK supply chain
2. Improving supply chain long-term competitiveness
3. Satisfying supply chain demand
4. Improving access to finance for the supply chain
5. Improving innovation and premium product manufacturing in the supply chain
Phil Davies, BIS
Chris Owen, SMMT IF
Chris Owen, SMMT IF
Lawrence Davies, AIO
Mike Mychajluk, JLR and Richard Hill, RBS
Survey of UK Tier 1 and SME suppliers for the Supply Chain Group by
• Philip Davies
• Matthias Holweg
• Nikki Huggett
• Stephan Schramm
• Yung Tran
Key findings – overview
• Around one third of UK Tier-1 purchasing is from UK suppliers
• The majority of imported goods are sourced from countries that are not regarded as ‘low cost’, such as Germany, France and Japan
• At every level there is a willingness to purchase more from UK, subject to the availability of a competitive source of supply
• Many in the UK supply chain feel confident about the near term future with over 80% of survey respondents expecting growth in their business.
• The main reasons for not purchasing more from the UK are
• a lack of suitable suppliers in the UK
• a lack of suppliers with the necessary capacity, and/or
• technical capability
Key findings – the opportunity
• More than half the components and materials (by value) imported by UK Tier-1 companies is accounted for by electronics, machined metal components, forgings, steel and plastic granulate/resin
• The UK automotive industry is achieving high productivity levels in comparison to its European peers, and we see no fundamental economic reason why the UK could not achieve similar levels of local content
• A realistic long term re-shoring potential (raising the proportion of goods sourced by UK Tier-1 companies to match the 60% local content typical at countries of similar standing) is estimated at £2 billion annually
• This is in addition to the £3 billion opportunity to increase UK Tier-1 content in UK-made vehicles addressed in previous Automotive Council reports
Key findings – market failures
• The information gap, with buyers insufficiently aware of suitable suppliers, whilst suppliers are insufficiently aware of potential demand for their products
• Access to finance remains a challenge below Tier-1
• Finance providers understanding of the investment potential
• Suppliers understanding of the requirements of the finance providers
• The UK upstream supply chain has a large number of small companies
• Few SME companies export from the UK
Recommendations
1. The high value import commodities should be investigated to determine the feasibility for increasing UK sourcing
2. Specific support should be given to SME supply chain companies to grow their long term competitiveness in line with the Automotive Industrial Strategy
3. Identify successful suppliers with the potential capability to be competitive and help them to grow through export support mechanisms
4. Further develop the process of matching buyer and seller through targeted Meet the Buyer events focused at a cross sector commodity level
5. Encourage more entrants to automotive from other sectors through cross-sector engagement, particularly for premium and high-technology product manufacturers within the aerospace, marine and motorsport sectors
6. Develop a network of SME supplier best practice clubs using an industry standard framework for benchmarking and non-competitive collaboration
7. Continue to work with the Finance community to develop a common understanding of the needs of SMEs and look to develop targeted solutions
Status and actions
1. The high value import commodities should be investigated to determine the feasibility for increasing UK sourcing
New action!
• BIS/AIO sponsored planning workshop scheduled for December to understand the opportunities and actions required in the metals sector for machined castings, forgings and steel/pressings
• Invitations being developed
• Volunteers welcome!
Status and actions
2. Specific support should be given to SME supply chain companies to grow their long term competitiveness in line with the Automotive Industrial Strategy
Ongoing in Workstream 2:
• AMSCI LTASC 1 & 2 programmes ongoing – £90m total programme and 100 companies, 956 jobs safeguarded/created so far
• New ‘bottom up’ AMSCI bid coordinated by SMMT IF for upstream supply chain companies to ‘volunteer’ and be sponsored by their customers
• Reduces application workload for SME by being part of a cluster bid
• Volunteers welcome!
Status and actions
3. Identify successful suppliers with the potential capability to be competitive and help them to grow through export support mechanisms
Ongoing in Workstream 3:
• Automotive Investment organisation working with UKTI
• Volunteers welcome!
Status and actions
4. Further develop the process of matching buyer and seller through targeted Meet the Buyer events focused at a cross sector commodity level
Ongoing through SMMT Supply Chain and Automotive Components Section
Status and actions
5. Encourage more entrants to automotive from other sectors through cross-sector engagement, particularly for premium and high-technology product manufacturers within the aerospace, marine and motorsport sectors
Ongoing in Workstream 5:
• Cross OEM assessment mechanism in development (“TS16949-lite”) for low volume speciality suppliers
• Multi-sector agreements in place with the British Marine Federation, Motorsport Industry Association and ADS
• Launch meeting being planned
• Volunteers welcome!
Status and actions
Ongoing in Workstream 2:
• Best practice club concept based on Toyota Team
• SMMT are funding the pilot programme
• Invitations imminent
• (More) volunteers welcome!
6. Develop a network of SME supplier best practice clubs using an industry standard framework for benchmarking and non-competitive collaboration
Status and actions
7. Continue to work with the Finance community to develop a common understanding of the needs of SMEs and look to develop targeted solutions
Ongoing in Workstream 4:
• Funding for tooling programme launched through Finance Birmingham
• BBA awareness sessions hosted by JLR
• Expanding to encompass funding routes beyond high street banks
• SME support group being established
• (More) volunteers welcome!
Conclusions
The Automotive sector is providing unprecedented opportunity for SMEs:
• Organic growth as production increases from 1.5 to 2 million units over the next three years
• A share of the £3bn Tier 1 opportunity
• Today’s report clearly identifies the opportunities for increasing upstream supply chain business – £2bn opportunity!
• Stronger SMEs can generate export business
We should be aiming to increase the number of commodity groups with UK market shares above 50%
A strong supply chain will encourage OEM and Tier 1 investment in production and R&D in the UK
Strengthening the Upstream
Supply Chain
Thank You!
Philip Davies, BIS
SMMT Webinar
November 2014
PAGE 25 SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED
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