Global Suppliers Need to
Catch Up to Global Platforms
The term “global platform” gets bandied about on a regular basis in this industry. OEMs, suppliers and industry pundits alike assume a slightly different definition to this important and growing concept. Whatever the definition, a couple of aspects are key. Global platforms should have annual volumes north of 30,000 units in two or more regions. This demands a replication of much of the supplier infrastructure in each region due to tariff, component, transportation and inventory costs as well as quality issues. Usually there is a “mother plant” to serve as the lead facility from which others can compare processes and problem resolutions during a launch.
Platform component commonality is important but not the final driver. Of greater importance is the commonality of the build process or “shingling” of the production process. OEMs and suppliers alike can save on up-front and downstream costs by utilizing common build processes between regions and even between platforms. Commonality in the bodyshop with respect to the size and configuration of engine bays, rough width between front frame rails, mounting points (or principle locator points) is another delineation of global platforms. Though some plants building a common global platform staff their facilities differently due to labor costs or scale issues — the all-important shingling pattern has little variation between these facilities.
Two other types of platforms exist. A “multiple” platform has a mother plant but low-volume “knocked-down kit” (also called CKD or SKD) assembly in other markets due to high tariffs. In most cases, the same supplier network is not replicated in these low volume assembly sites due to capability, cost and scale issues. A last platform variety is called “singular” — built in only one region for the world. Many older platforms from the Big 3 fall into this declining category as well as low-volume niche or luxury offerings. A couple of trends are immediately clear when one digs deeper into platform trends in the coming years.
The pace of global platform growth in terms of overall volume is understandable. Examples such as GM’s Epsilon effort in mid-size unibody offerings or Renault/ Nissan’s B platform are both examples of global consolidation efforts from many singular and multiple platforms. In 1997, global platforms accounted for 59 percent of total production. By 2002, this reached north of 65 percent and in five years will ascend to over 72 percent. In 2007CY, this growth of 13 points is reflected in eight million more units being shared on a global basis from 1997.
Both multiple and singular platforms will share in the decline to 2007 though for different reasons. As production rationalization downstream costs by utilizing processes between regions on a regional basis accelerates due to falling tariff and nontariff issues, OEMs are eager to raise scale economies and lower costs through centralized sourcing. There are several examples of this in the ASEAN countries of Thailand, Philippines, Indonesia and Malaysia going forward. The number of platforms classified as multiple will decline to 10 percent of total by 2007. Singular platforms are set to tumble as more OEM consolidations and interregional platform sharing bear fruit through combined global platforms. GM and Renault/Nissan are especially active in this area as the number of older stand-alone platforms decline in the name of global breadth and scale. Singular platforms are slated to account for 17 percent of total by 2007.
The world has become a smaller place. Playing the global game is not optional any longer for the supplier community. Those who decide to engage and expand their capabilities on a regional basis will have a greater chance for survival over the long run.