BRICS Countries

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Introduction

BRIC is an acronym that refers to the economies of Brazil, Russia, India, and China, which are seen as major developing economies in the world. According to Forbes, "The general consensus is that the term was first prominently used in a Goldman Sachs report from 2003, which speculated that by 2050 these four economies would be wealthier than most of the current major economic powers."

In March 2012, South Africa appeared to join BRIC, which thus became BRICS. At that time, Brazil, Russia, India, China and South Africa met in India to discuss the formation of a development bank to pool resources. At that point, the BRIC countries were responsible for about 18% of the world's Gross Domestic Product and were home to 40% of the earth's population and occupy over a quarter of the world's land area. Brazil, Russia, India, China, and South Africa together are a powerful economic force according to Forbes.

Much has been written about the potential of these countries, their rapid growth, and how they are becoming important markets for companies to be represented within.

The rise of the BRICs and logistics challenges in the Automotive industry

Vehicles are a complex bit of kit. A typical car consists of 12,000 parts that must be designed and manufactured to be compatible and integrated as the final product. An elongated supply-chain that stretches from raw material supplier to parts supplier and final assembler characterises the manufacture of a vehicle.

In the early days of the automobile vehicle manufacturers tried to do as much in-house as they possibly could. But a multitude of individual factories dedicated to making specific parts was clearly costly and unsustainable from an organisational point of view. It was a lot to coordinate, especially as mass production manufacturing techniques took hold. To this day, levels of vertical integration among automakers differ widely, some preferring high vertical integration for reasons of control or to protect product innovations, others resorting to outsourcing as much as possible in an effort to reduce costs.

In the 1920s and 1930s in North America, decentralised parts-making divisions with separate profit centres were devised as a solution. That way you could get the benefits of specialisation and cost management, but within the context of a unified group. Eventually, some parts companies became fully independent and able to generate bigger scale economies as they supplied multiple customers – forming many of the big Tier 1s or systems integrators that we know today. These firms, with their global footprints, supply parts and sub-assemblies to vehicle makers.

As the auto industry has globalised, the big suppliers have followed their customers. If a Tier 1 wins a big contract to supply, say, a front-end module on a particular vehicle programme, these days that will typically entail supply to the vehicles under that programme to production sites across the world. And the provider of the sub-assembly system has to coordinate with its suppliers – Tier 2s - and any raw materials suppliers to ensure that it manufactures the sub-assembly to meet its customer's requirements on product cost, quality and timeliness of delivery.

The increasing complexity of designing and producing a motor vehicle is also forcing OEMs to identify key first-tier suppliers and give them more responsibilities, to work with them more closely on design and engineering for future product. That helps to create a mindset from design concept to production fulfilment that is geared towards process integration.

Along with a growing understanding of the need to reform the automotive supply chain, a parallel development over the last twenty years has been the steady rise of third-party logistics providers serving many industries. These specialist service companies have been able to meet manufacturing industry needs across the world as international trade volumes have grown....