The ripple effect of auto sales on the supply chain

An article in Bloombergbusinessweek (May 21, 2012) describes the growth in auto sales to 2008 levels (14 million) – back to 2008 levels – and its ripple effect across the supply chain. Tooling and ficture manufacturer Apex Tool claims growth, as does fuel system tuneup kit manufacturer 3M, railroads that transport cars, car interior manufacturer Faureica and the credit arm of VW Credit. In short, increased car sales grows the economy $ 2.02 for every $ 1 spent. But the low inventory to sales ratio of 1.9, as agianst a level of 2.4 in 2008, suggests that increased sales will be passed through as increased production to keep pace. Does the low inventory in the auto supply chain suggest increased volatility that has to be borne by supply chain participants ? Given a volatile demand, with low inventory buffers, will margins erode ? Will the impact on restaurants and other services generate an even larger supply chain impact across the economy ?

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About aviyer2010

Professor
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