GM supplier base struggles to cope with demand image

During an annual gathering in Detroit bringing toghether around 700 suppliers, a US executive at GM said that besides automakers, their suppliers would also need to move and increase production capacity to cater for the rising consumer demand.

According to GM’s purchasing chief, Grace Lieblein, the surprisingly strong US auto sales have put pressure not just on Detroit’s automakers, but also on their supplier base, which are now “stretching the boundaries.”

“We just have to be cautious and strategic about how we add that capacity and not move too fast,” she comments.

Following the 2008-2009 economic crisis, both Detroit’s three and their industrial partners moved to swiftly cut production, close plants and terminate excess jobs – allowing for production to remain in line with demand. But, with the sales on pace to exceed pre-recession levels, the supply chain now has another problem – how to cope with the increased demand.

While US residents are on pace to reach the highest annual buy rate since 2006, automakers add new shifts and hire more workers to keep on track. Their suppliers on the other hand, need to deliver more products, just as GM – for example – keeps asking them to further slash costs. One move to do that is for the suppliers to relocate closer to the automaker’s factories, thus cutting transportation costs.