When you want to cut to the chase on a given aftermarket subject, one of the best people you can go to is Dick Morgan, president and CEO of the Automotive Aftermarket Parts Alliance and chairman of the Automotive Aftermarket Industry Association. The question posed was, "What's the long-term effect of global sourcing from low-cost countries?" Morgan's answer: "It makes our domestic vendors better vendors. They're not going to go out of business. They're going to learn how to cope."
I had the opportunity to ask Morgan and several other top aftermarket executives that question for our Aftermarket Business Network, a video feature on our new Web site portal — search-autoparts.com.
Proving Morgan is on track, consider what Federal-Mogul is doing. Jay Burkhart, the company's vice president of global aftermarket, says his company sees global sourcing as an opportunity and is setting up a global sourcing division so it can do sourcing direct to the channels. He says this is in response to the problems that distributors and retailers have encountered by sourcing from LCCs.
"Global sourcing has added a lot of costs for distributors and retailers," Burkhart says. "They have to hire outside labs to do (product) testing...And they probably have to have satellite warehouses to hold all of the products coming over as safety stock."
Burkhart goes on to say that distributors and retailers may have saved on initial procurement costs, but have wound up paying more in total costs.
A different point of view comes from Ken Selinger, whose company is focused on U.S. manufacturing. Selinger, director of marketing & product development, aftermarket & OES divisions, Akebono-N.A., sees a number of risks in working with LCCs. At the top of his list are product consistency, political instability and delivery logistics and its associated costs.
Moreover, Selinger says if you subcontract with a company in a LCC, "you risk losing your core competency or core technology to that company."
David Coolidge, president, Automotive Aftermarket Division of Bosch, says he is not concerned with LCCs at the moment because Bosch is a high-end player. "The low-cost countries are not able to offer value-added services such as supply chain management, training, technical support, sales support, warranties and returns."
Having said that, however, he concedes that Bosch is concerned over the long-term, because it is inevitable that the LCCs "are going to move up" in price positioning.
No doubt that sourcing from LCCs is still playing out. But judging from what's gone on so far, opportunities abound.
