SOUTHFIELD, Mich.—Brian Pour's customers would like him to locate his parts plants closer to them. But Pour, CEO of Auria Solutions, a global supplier of soft interior parts such as vehicle flooring, isn't so sure.
"We want to be close enough to a customer to give them everything they want on quality, cost and delivery," Pour said of his thinking about future plant sites. "But I need to be in a location that's far enough away that I can diversify my customer base and justify my costs."
How close can a supplier get?
That question has been a recurring one over the last decade. Auto makers, state economic development agencies and local industrial interests have attempted to lure parts suppliers to sites in the same state, the same county, the same ZIP code and, in many cases, the same supplier park or even under the same roof as the vehicle assembler.
The question is on Pour's mind right now.
Auria, with operating headquarters in Southfield, Mich., and Dusseldorf, Germany, has a new wave of technology coming to North America called 3D Blown Fiber. Introduced to Auria by its new majority shareholder, Shanghai Shenda Co. of China, the subcarpet material is in development at Auria's fiber engineering center in Old Fort, N.C.
In two years, the material will begin going into vehicles. At that point, Auria will need to have a new North American manufacturing plant up and running. Pour said that plant will employ about 365 people and generate $50 million a year in revenue.
The question now, two years out, is where?
Pour's team already is in discussions with various cities. For the CEO, the ideal location will be within 100 to 200 miles of the material's first customer, which he declines to identify. It will be no closer than that, he emphasized.
"The OEM says, 'We want you here,'?" Pour said of pitches from various auto makers over the years on different programs, urging him to locate near their doorsteps. "But our message back is this: If I give you a facility that's totally dedicated to your business, your costs will be higher. If I can diversify my customer base, it's better for you and all of my customers."
Even supplier parks have shown spotty results over the last 10 to 15 years. Auto makers can obtain a lower price by reducing a component's shipping cost from a factory 150 miles away to one just 4 or 5 miles down the road in a supplier park. But the decision to open shop in a supplier park assumes that the automaker's sales forecasts are accurate — that a parts maker will be able to defray its plant investment over a steady multiyear production level.
The disappointing unknowns can be painful. The economic crisis of 2008-09 threw the entire industry for a loop on production volumes. And few in the industry foresaw the current decline in demand for once-popular sedans.
Auto makers also are in a state of uncertainty at the moment, a reality that has a bearing on supplier locations. Two years ago, Toyota Motor Corp. broke ground on a plant in Guanajuato, Mexico, to produce Corollas. Last year, Toyota changed its plan to produce Tacoma pickups there instead.
Auria's 365-worker plant is only the first step for its new floor material. Once the product goes on sale, Pour expects to add other customers, meaning more production locations. Not every customer will warrant a new Auria factory. Pour envisions adding processes, lines and workers to existing plants around North America where it makes sense.
But even those looming decisions will face the same question of logistics: How close is close enough?