Auto Sector Keeps Buyers Busy

April 10, 2015
The burgeoning automotive industry is putting new pressures on direct and indirect suppliers to auto makers.

With the automotive market in full economic recovery mode, the entities that directly and indirectly support this growing industry are seeing new levels of demand for the many different electronic components that go into the average vehicle. According to the Alliance of Automobile Manufacturers, sales of light vehicles in the United States increased by 5.8% in 2014, representing the highest level of sales since 2006.

As a maker of plastic bushings and other components for the automotive industry, igus, Inc., of East Providence, R.I., manufactures Energy Chain cable carriers, Chainflex Motion Cables, DryLin linear bearings and linear guides, iglide plastic bushings, and igubal spherical bearings. Buyer Kevin Perito says he’s seeing several trends developing within the auto-related electronic components market right now. For one, he says some connector manufacturers are “more willing to work with you when it comes to keeping up on the increased demand as the automotive industry continues its explosive comeback.”

Lead Times and Costs

In assessing order lead times, Perito says that ODU connectors have become harder to procure on set timelines. Accustomed to 8- to 10-week lead times on ODU connectors, Perito says he’s now seeing deliveries within 14- to 16-week windows.

“That’s happened on our last few connector orders,” says Perito, whose firm has been negatively affected by the extended delivery times. “This has put a tremendous strain on our production—to the point where we had no choice but to involve our end customer in the negotiation to [maintain] stock stateside.”

Perito says he hasn’t seen any notable pricing fluctuations within the electronic component sector.

“As a matter of fact,” he explains, “for the most part we've been able to maintain the same cost for the past two years for the connectors we purchase, and that benefits us greatly. It also benefits our customers, who can rely on stable pricing of our products.”

According to Perito, one of igus’ largest automotive customers is in the process of retrofitting and/or replacing the ReadyChain systems across all of the robotics within the manufacturer’s assembly plants. He says this undertaking has greatly increased igus’ Harting consumption.

“Working closely with Harting, along with distributors Madison Electric and Allied Electronics, has made this increase in demand relatively painless,” Perito notes.

Going forward, Perito says he sees the automotive market’s continued, positive sales momentum as a good sign for the remainder of 2015.

“The explosive 2014 year in automotive sales has led these [auto] companies to invest in upgrades and retrofits,” says Perito, who acknowledges that the growth could pose challenges for the burgeoning sector’s suppliers. “Our key to preventing those challenges is having solid relations among the manufacturers, distributors, and ourselves—a strategy that’s worked well for us over the last few years.” 

Shoring up the Supply Chain

Joe Venturella, vice president of electronic component distributor TTI, Inc.’s Transportation Business Unit in Chicago, says he’s seeing more companies moving to “localize products” that are being consumed by their factories.

“They are attempting to flatten the supply chain and have one company move products around the globe with the ultimate destination being the country where they are manufacturing the product,” says Venturella. “The key goal of this activity is to have more flexibility for manufacturing without having extended lead times for components.”

Venturella says that both product lead times and costs have remained stable over the last few months.

“We aren’t seeing a lot of price fluctuations due to the stability of overall raw material costs,” says Venturella. “Some key suppliers are using this opportunity to analyze product life cycles and make some price adjustments for lower volume part numbers that are more mature in the product life cycle.”

Pointing to the electric vehicle and high-power products sectors as particularly active markets now, Venturella says effective supply chain management is coming into play more and more as suppliers strive to meet the demands of the auto industry.

“The key issue right now is managing the supply chain for electronic components and providing the service and flexibility that customers demand,” says Venturella. “Many of our key customers work with very short lead- and manufacturing turnaround time from their customers.  In order to make this work, somebody in the supply chain has to have the inventory in place to service this demand.”

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