OESA/HRI Tooling Barometer: Reducing Automotive Tooling Supply Chain Costs
The Original Equipment Suppliers Association (OESA) and Harbour Results Inc. (HRI) recently completed its Automotive Tooling Barometer. This research shows a positive trend in the amount of work being awarded to automotive tooling manufacturers on progressive payment terms. However, overall tooling supplier sentiment was down seven points from last August, due in part to a significant amount of work on hold as a result of program delays. Almost 20 percent of currently sourced business is on hold, corresponding to $2.3 billion in tooling revenue, or the equivalent of more than 100 tool shops, sitting idle. This is a 5 percent increase from the previous Tooling Barometer conducted last summer.
Additionally, overall capacity utilization metrics were flat at around 80 percent. Using a standard tool shop 50-hour workweek, most respondents were hovering near 40 hours. The situation may actually be more dismal than the 80 percent indicates as tooling manufacturers are often reluctant to have employees work less than 40 hours per week. HRI, having been in more than 30 shops over the last four months, observed some shops finding ‘other’ work for employees to perform to offset the impact of the on-hold work.
Even with the current lull in production, tool shops are gearing up for a busy second half of 2016. More than 75 percent of tool shops said they were optimistic about the future. With 2016 being forecast as a heavy sourcing year for automakers, many tool shops are assuming this current downturn is temporary. The Automotive Tooling Barometer also solicited feedback from automakers, Tier 1s and tool shops to better understand cost drivers.
“According to an LMC Automotive forecast, the North American light vehicle demand is predicted to plateau at 20 million units through 2020,” said Laurie Harbour, president and CEO, HRI. “It is critical that the automakers, Tier 1 suppliers and tool shops improve communication and collaboration to reduce cost and remain profitable during this period.”
HRI’s analysis of the survey demonstrates that tool complexity, communication and engineering changes are the main cost drivers in tool construction. The majority of respondents indicated tools could be simplified to focus on functionality rather than perfection, but that this would require significantly better communication throughout the supply chain.
“We are pleased to release the latest Tooling Barometer, in partnership with Harbour Results,” said Julie A. Fream, president and CEO of OESA. ”It is important that the automotive industry collectively address the tooling industry’s concerns to ensure we are able to support of the record number of upcoming vehicle launches.”
About the OESA/HRI Tooling Barometer
The OESA Automotive Tooling Barometer survey series was created by the OESA Tooling Forum with the partnership of Harbour Results, Inc. to provide an indicator of the current state of the automotive tooling industry, and the perception of the near-term prospects for the industry. The OESA Automotive Tooling Barometer captures the sentiment of the major companies in this market. A full copy of the January OESA Automotive Tooling Barometer results is available on OESA’s website.
About HRI, Inc.
Harbour Results, Inc. was established in 2005 to support North American small and medium sized manufacturers to compete in the global manufacturing environment. HRI is a strategic and operations advisory firm that helps companies identify performance gaps, implement innovative operational and financial solutions, develop strategic plans that matter and improve profitability. For more information, please visit www.harbourresults.com.
OESA provides a forum for automotive suppliers by addressing issues of common concern through peer group councils, serving as a reliable source of information and analysis, providing an industry voice on issues of interest and serving as a positive change agent to the automotive industry. With nearly 450 members, OESA represents more than 70 percent of North American automotive supplier sales. For more information, visit http://www.oesa.org. OESA is the original equipment Division of the Motor & Equipment Manufacturers