When we talk about the automotive supply chain, the focus is often on component manufacturers, the companies that produce the parts that are assembled into vehicles at the automakers’ plants.
However, that view overlooks a sizeable supporting cast, since component suppliers rely on a network of others to perform secondary operations that are critical to the end result. These service providers are an important part of the reason that West Michigan has been so successful in the automotive industry.
Secondary operations are steps that need to be taken at various points in the production process to give a material certain properties, or to achieve particular characteristics, prepare the part for further processing, or as a finishing touch. Some examples are parts washing, deburring, e-coating, painting, zinc plating, decorating, heat treating, and more.
Component manufacturers outsource these activities because it is more cost-effective to divide and conquer.
“We’re a stamper, that’s not what we do,” we were told recently by a company explaining its use of Premier Finishing Inc. in Walker. “They’ve got these big vibratory barrels and all the media, whether corn cob or whatever, so it makes more sense to do the tumble deburring there. They also wash the parts, and we use them for black oxide coating, so they’ve got the equipment to do a number of things that we just don’t want to get into.”
Some secondary processes are straightforward and unglamorous, albeit still necessary. Others lend themselves more to technological advancement, so companies that decide to focus in these areas can be every bit as leading edge as those that are in the forefront of product development.
An example of a company that supports component suppliers in this realm is Spectrum Industries Inc., headquartered on the West Side of Grand Rapids.
Spectrum Industries’ E-Coat Division was founded in 1979 and its state-of-the-art electrodeposition paint systems apply a high-corrosion-protective coating to more than 1 million small to medium-size parts daily, according to the company. Not content to stick with the basics, Spectrum Industries developed an expertise in high-volume painting of plastic parts and formed the Decorative Finishes Division in 1990. Today, it uses six-axis robots in a clean room environment to apply high-end finishes.
It claims to be one of the largest North American providers of hydrographics, a process of applying printed designs, such as wood grain or technical patterns, to three-dimensional surfaces. The company’s success with innovation is evident in the awards and ratings it gets from automotive customers such as TS Tech Americas, Summit Polymers and General Motors.
What component suppliers are primarily looking for in a provider of secondary operations is superior customer service. They consider these companies to be partners in the task of fulfilling their contracts with the automakers or Tier 1s, so they need to be able to count on them to help, not harm, their own performance. This means there is an expectation of high quality and timely execution, regardless of what wrenches are thrown their way.
As is the case with component suppliers, price also matters. Service providers in the automotive supply chain are just as likely to get hit with a request for a price reduction in an existing contract, and/or lower prices on new contracts. They will also find that some component suppliers are willing to negotiate and others make their request in the form of a demand.
To increase their options in how to respond, secondary processors need to employ the same strategies adopted by their customers in years of addressing price reduction requests from the automakers. They need to assess their customer mix, analyze profitability by customer and product line, and dig into their cost structure to decide how to maximize and where to use their profit margins.
If they have planned well, they can prosper even when, as sometimes happens, they say “no” and the component supplier moves its business elsewhere.
The supply chain works best when component suppliers have access to what they need at a reasonable cost, and that means that geographic proximity has value. All else being equal, a supplier would prefer to deal with a local source — it’s easier to communicate and interact, and freight costs are lower.
If a component supplier cannot find a suitable source here, there are plenty of choices in the southeast part of the state, but a “cluster” of automotive manufacturing-related resources makes the whole supply base in West Michigan stronger.
In other words, “buy local whenever you can” appears to be a good philosophy.