Automotive suppliers are better at improving their supply chains than companies in other industries, according to a consultants study.
BESTgroup, a German supply chain consultant, said automotive suppliers show long-term improvements in value creation, inventory management and cost control. Over similar periods, companies in other industries show little or no progress in these areas.
Automotive suppliers are continuously improving their cash-to-cash cycle time. This measures the time that elapses from the moment a supplier’s bills are due to the time he gets paid by his customer.
This time span was cut in half by the best-performing automotive suppliers between 2004 and 2010, BESTgroup said. On average, companies reduced the time by a third.
Best-performing suppliers also improved their inventory management, though improvements were smaller in 2009 than in 2010. BESTgroup noted that suppliers’ performance on average has deteriorated in this area, with many companies actually building up inventories rather than reducing them.
Said BESTgroup Managing Director Torsten Becker: “If a supplier with an average inventory range reduces that inventory in line with the best performing companies, it can reduce inventory by a third.”
He added that the value of such an inventory would be cut by 400 million euros in such a scenario and noted: “In such a case a supply chain project would quickly yield a payback.”