Nearly 100 suppliers compete for 30 billion orders

More than 70 companies are now waiting in line to establish factories in Wuhan. Inspired by the expansion signal from Shenlong Motors, over 70 domestic and international small and medium-sized auto parts enterprises have registered and begun setting up their plants in the Wuhan Economic and Technological Development Zone, creating a bustling scene that has been ongoing for several months. To gain access to Shenlong's "Strategic Supplier" list, which is part of its 30 billion yuan procurement plan, high-level manufacturers from around the world, including major multinational component firms, have been visiting Wuhan frequently. According to Ning Xiaoyang, head of purchasing at Shenlong, companies like Visteon, Faurecia, Lear, and Stilton have sent senior executives to visit Shenlong and have clearly expressed their intention to invest or expand their operations. As the layout of the Wuhan Development Zone becomes more established, land availability has become limited. However, the city has allocated 102 square kilometers of land in Caidian District’s Junshan Street to the development zone, easing the pressure on enterprise land supply to some extent. According to Shenlong’s capacity planning, annual production is expected to rise from 300,000 to 500,000 units by 2010, with spare parts purchases increasing from 15 billion to 30 billion yuan. The company currently sources nearly 10,000 types of auto parts and industrial products annually, working with over 300 major auto parts suppliers and nearly 500 industrial product suppliers. To support this growth, Shenlong has decided to create a global procurement and supply system, forming strategic partnerships with stronger suppliers and building two large industrial parks in Wuhan and Xiangfan. The new supplier standards require strategic partners to meet long-term development needs, achieve first-class quality, be globally competitive, and deliver new products quickly. They must also possess core technologies and have irreplaceable advantages in production and quality over time. Valeo, one of the top ten global auto parts suppliers with annual sales exceeding 10 billion euros, entered Wuhan’s development zone as early as 1995 to produce headlights for Shenlong. “Our 3,600-square-meter extension plant is almost complete, and we are using globally synchronized equipment,” said the general manager of Valeo Lighting. In early 2007, the company invested an additional 100 million yuan to start the second phase of the project, anticipating Shenlong’s expansion. Dongfeng Visteon, a joint venture between Dongfeng, SAIC, and Visteon USA, is a key manufacturer of dashboards and interior/exterior trim parts for Shenlong. Established in 2003, the company had annual sales of 400 million yuan, with 250 million coming from Shenlong. As a leading supplier, it is also preparing for expansion. However, not all suppliers will benefit from the upcoming growth. With PSA’s dual-brand strategy, Shenlong plans to launch 12 new models by 2010, with 3-4 models each year. Despite this, Shenlong’s long-standing weaknesses remain: insufficient localization of parts supply and high logistics costs. Many domestic strategic suppliers lack strong independent R&D and management capabilities. In 2006, Wuhan’s total automobile output value was 42.7 billion yuan, with 31.5 billion for vehicles and 10.5 billion for parts. Last year, automakers issued 15 billion yuan in orders for components, but local orders were less than 4 billion, forcing companies like Shenlong and Dongfeng to seek suppliers in Jiangsu and Zhejiang. Cultivating strong local suppliers has thus become a top priority. Ning Xiaoyang noted that existing Shenlong suppliers struggle with low production efficiency and poor ability to develop alongside new models. “If their products cannot keep up with future French model launches, many will find it hard to secure new orders.” Shenlong sources also point out that domestic suppliers still lag behind international counterparts in R&D, production, and management. As a result, multinational giants are gaining an edge in this competitive market.

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