Putting the Pedal to the Metal

Recent innovations have transformed traditional sourcing, manufacturing, and distribution practices within the automotive industry.

If it seems like there are more cars on the road (and more traffic) than ever, you might be onto something: in the US, 17.5 million new vehicles were sold in 2016 alone. While recent innovations in automobile manufacturing have upended the traditional supply chain, production has continued at a frenzied pace, creating new opportunities and unprecedented challenges for the country’s manufacturers. Let’s take a closer look at how cars are manufactured today, and what the future has in store for the automobile supply chain.

From the Assembly Line to the Driveway

A typical automobile manufacturer reigns over an extensive supply chain, with companies across the world supplying thousands of components for final assembly at the plant. In fact, the average car is constructed from 20,000 to 30,000 parts, most of which are manufactured by different companies in different factories. As you might expect, building and shipping these parts in a timely manner is a complicated process, demanding close collaboration between manufacturers and suppliers and careful coordination of every aspect of the supply chain.

Most automobile manufacturers are classified as “original equipment manufacturers” (OEM) — companies responsible for designing and marketing cars, ordering the parts from suppliers, and assembling the final product.

The materials and components used in the finished vehicle are sourced from several tiers of suppliers:

• Tier 1 suppliers make “automotive-grade” hardware, or hardware specifically built to meet the manufacturer’s standards regarding motion, temperature, and longevity.
• Tier 2 suppliers provide materials for automotive manufacturing, but don’t necessarily cater to the automotive industry. Computer chip manufacturers like Intel, for example, provide both automotive and non-automotive-related parts.
• In contrast to Tier 1 and Tier 2 companies, Tier 3 suppliers provide raw materials such as metal and plastic.

Once these components have arrived at the OEM production facility, they are assembled piecemeal on a line, generally by specialized machinery. The cars are then transported to dealerships, where they’re made available for sale to consumers.