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Managing Growth in the Asian Auto Industry � A Challenge for Automotive Suppliers

By Mr. Arun Kumar - Director & Vice President of Omnex Asia Pacific Operations,Omnex Inc.

On October 26, 2012 Arun Kumar, Director & Vice President of Omnex Asia Pacific Operations spoke to a group of Automotive Industry VIPs invited from all over the world, including large OEM and Tier 1 companies. Mr. Kumar spoke to the audience as part of the Automotive Industry Action Group (AIAG) supplier event in Beijing to discuss the current state and challenges of the Automotive Industry in Asia.

Invited guests, Ladies and Gentlemen,

It gives me immense pleasure to stand before this distinguished gathering of bureaucrats, professionals and eminent professionals from the Automotive industry all around the world.

As we all know, the Automotive Industry in Asia has gone through

  • Period of increased growth � China has contributed to 32% of the global sales growth since 2007 to date.
  • The Automotive industry is forecasted to grow from 32 million (units) in 2011 to 53 million by 2020. APA will account for 46% of the global automotive industry market and over 60% of its growth.

Expo opening ribbon-cutting group photo

Ford says - 60%-70% of Ford's growth in the next 10 years will be from Asia/ Pacific and Africa.
In 2010, one in every six vehicles Ford sold globally was sold in APA. By 2020, it will be one in three.
Bottom Line � There is a great interest in Asia by both Domestic and Global Automakers.

The China Government�s 12 x 5 strategic plan has major initiatives that will affect the Chinese Automotive Industry

  • Green Car to protect the environment
  • Move Chinese Automotive industry to Innovation from just manufacturing (in other words do more design in China and not only manufacturing that they see has low value added)

These factors all mean rapid new product launches in Asia and especially China.

Major OEMS are introducing

  • 25 new vehicles and 20 new engines & transmissions to China by 2015,
  • 18 new vehicles to India by the middle of the decade,
  • 12 new vehicles to ASEAN during the next five years.

Omnex China, GM and the Ministry of Commerce the Minister Li Rongcan assistant photo

These changes have a dramatic impact on the OEMS in terms of infrastructure, management, processes and capacity. It also means that the existing supply chain needs to improve. Not only OEMs, but suppliers in APAC and China will need to develop ability to design and launch new products quickly and sustain this. There is a need to find new suppliers due to new Products and Green Technology.

The automotive supply chain in Asia has grown leaps and bounds, thanks to the concentrated efforts of associations like AIAG, who bring the latest of methodologies and practices to this part of the world including releasing new standards in various methodologies. The average Tier 1 or Tier 2 supplier to the Automotive industry is eager to embrace these techniques as well.

Despite best efforts, there is still much work to be done since we have recalls from OEMs and a large portion of the Asian supply base struggling to provide the OEM First time Right products and services, Just in Time, every time. The truth is that the supplier is still confused on what to do and how to accomplish this while reducing overall costs to the OEM, and yet show an increase in profits for their own enterprise.

 AIAG Asia-Pacific Director Dr. Chen Yilong Chair

ISOTS 16949 and its reference manuals have provided a good guidance to these suppliers, but it is easy to find slack implementation of the tools just for the sake of certification. As Omnex has been preaching over the last 2 decades, certification should only be the by-product of good management system. Supplier processes and management capabilities need to continue improving in the Asia Supply Chain.

Omnex has been helping the automotive suppliers and OEMs in Asia for over 16 years now, and have served over 10,000 clients in Asia alone. We have done multiple projects helping develop supplier capabilities for New product launches to supporting OEMS. We are again currently partnering with a large European OEM to improve the capabilities of their supply base in Quality, Lean, and Logistics. So we have first hand knowledge of the work that needs to be done in China. Frankly, it is going to take the kind of effort that OEMs put into the supply bases in the 1980s and 1990s in the US to improve the tier one and tier two supply bases.

Omnex China, GM - Michael Xu (left) and Speakers

The challenge for the OEM is how to become innovative in the Asian market designing products to meet both customer and governmental needs. Developing capable supply chains both internally and all over Asia is going to be a key strategic imperative.

The biggest challenge is of course for suppliers. Very rewarding, but the focus has to be in improving internal process performance, overall competitiveness and their ability to develop and adopt new technologies and design products.

It�s a known fact that suppliers need more access to technology, latest implementation techniques, and best practices.

Its my strong belief that events such as this one is truly extending a helping hand to suppliers to understand the expectations of OE giants and how serious they are in pursing Operational Excellence for their suppliers. Let me thank AIAG for having us co-sponsor the event and also congratulate them on arranging this event. I hope you all have a wonderful time at this event.

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