Not much more than a decade ago, every sizeable vehicle maker had several thousand suppliers. Today, even the biggest, such as General Motors, measures its supplier base in hundreds.
It is a big achievement. Cars and trucks have become the most complicated consumer goods on earth, made up of several thousand parts and embracing just about every advanced technology from electronics to metallurgy.
And it was absolutely necessary.
It would not have been financially feasible for car makers to develop the array of IT and other advanced systems currently transforming cars from simple transport to mobile communications and entertainment centres.
The evolution had thus become inevitable of a supply chain in which a relative handful of large and deeply-resourced suppliers - such as Delphi, Visteon and Motorola of the US, Robert Bosch of Germany and Denso of Japan - carry the burden of systems development in return for contracts to supply, not components, but entire sub-systems directly to the car makers to assemble.
Inevitably, too, it is to the biggest - so-called "Tier 0.5" and "Tier 1" - suppliers that the task has fallen of sharpening the skills, productivity and cost-competiveness of the smaller parts makers who supply directly to them. And so on down the line, from Tier 2 through Tier 3, to the makers of the smallest nuts and bolts.
But, says Martin Smith, PA Consulting's head of supply chain services and global manufacturing industries practice, "there is much more to come.
"Companies need to focus on realising value from their supply chains by being clear on where the value is being generated and destroyed, and aggressively addressing the levers, such as sourcing, product optimisation, technology, aftermarket and complexity which deliver increased value."
For the motor industry at least, the process has not necessarily been wholly adversarial. The big Japanese car companies, such as Toyota and Nissan, recognised at an early stage that improvements at any link in a supply chain improved the price, quality and, thus, the competitiveness of the finished product.
To the initial amazement of Western car makers, the Japanese manufacturers invested in trouble-shooting teams whose sole role is to go on-site to help suppliers improve.The initiatives have paid off, and have since been widely replicated.
But Mr Smith stresses the potential downside to the restructuring that applies not just to the auto industry but other sectors with extensive supply chains.
Some time ago, car makers such as Ford and GM began to question whether, in passing the risk and responsibility of systems development on to suppliers, they might also be kissing goodbye to rather too much of a finished vehicle's added value. The same question is being asked increasingly over a swathe of other industries.
It is a balance which, in many cases, is still being sought. "In PA's experience, companies often don't know if they are getting more value," says Mr Smith.
That leaves both car makers and suppliers with a strong common interest in driving down costs.
So is there more still to be squeezed out of the supply chain? Most industry analysts believe there is. For the auto industry, in particular, better understanding of design and function is still a major factor.
Outside the sector, internet-based trading mechanisms are making markets more transparent and thus vulnerable to downward pricing pressures. By PA's calculations, internet auctions can produce price cuts of 10-15 per cent across a range of supplies and components.
More effective exploitation of aftermarket possibilities also provides potential.
There is also the vexed question of standards and still-to-be-achieved gains from standardisation.
Many more components could be shared between manufacturers, with much greater economies of scale, without having an impact on the awareness of customers. To do so, to some extent requires a common regulatory regime between the major manufacturing nations - in many areas, still proving elusive.
Not least, there is the risk arising from a supply chain so simplified as to leave manufacturers vulnerable to the disruptions which can arise from single sourcing. Ford, for one, has suffered from assembly lines halted by problems at a single-source supplier.
Again, it is a question of balance. But it is better not to forge too close a relationship with suppliers, suggests Mr Smith.
It is better "to develop supply chains that leave some sourcing flexibility and challenge."
(c) 2004 The Financial Times Limited. All rights reserved
