Ever wonder how many US Auto Suppliers there really are?
I was asked by a colleague to estimate the number of automotive suppliers in the US by tier.
This is a difficult question to answer for a number of reasons.
Nonetheless, we took our best shot answering the question based on our knowledge, experience and intuition. I’d be interested in feedback of any kind from others who might want to share their own thinking.
Here are a couple of things to consider with respect to this exercise and the resulting numbers:
- In theory, a Tier 1 supplier is a direct supplier to an automotive original equipment manufacturer (OEM). A Tier 2 supplier is a supplier to a Tier 1 supplier — and so on down the tiers. In practice, a single company can be a supplier to multiple tiers simultaneously. Any estimate of the unique number of manufacturing sites needs to account for this.
- There is a practical difference between a “Company” and a “Manufacturing Site”. The distinction complicates matters when you try to answer a question like: “How many suppliers do you have?” In almost every case, it is the manufacturing site that matters. Manufacturing sites receive raw materials, employ direct labor, consume energy, are subject to environmental laws, hold physical inventory and ship product to customers. Manufacturing sites are the choke points at which supply chains can break. They are subject to capacity constraints and interruption by external events. In the higher tiers, a single company can have dozens of manufacturing facilities. Supply chain analytics requires site-level connections. Counting or talking about the number of companies isn’t very useful.
- Visibility to individual suppliers deteriorates with distance from the OEM. Many OEMs have worked with their direct, Tier 1, suppliers to get a snapshot of the most important Tier 2 suppliers. Beyond Tier 2, visibility falls off dramatically. Because of this, the estimate of Tier 3+ supplier site counts is based more on models and assumptions than on actual survey.
Factoring for these fundamental challenges, the following table provides our best estimates of the number of US automotive supplier manufacturing sites by tier:
Originally posted on LinkedIn by Tor Hough
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