Automobile Industry Overview
The automobile industry is a substantial contributor to the US economy and accounts for almost 28% in total GDP. This makes the automobile industry a lucrative option for investors. However, the falling demand for cars, unpredictable “trade wars and tariffs”, limited access to industry-specific data, increased competition, technological advances is making it difficult for automakers to sustain.
Business Challenges Faced
The client is a renowned company in the automobile industry. After four years of strong growth, car sales reduced drastically in the last quarter of 2018 because of a slump in demand in the world biggest market, China. This created pressure on the client to reduce production costs. The rising number of derivatives, new vehicle functions, requirements for safety and fuel efficiency, and tighter legal requirements further compelled the client to devise a procurement model that would ensure quality, innovation, and flexibility apart from increasing cost efficiency. The client, therefore, approached SpendEdge to leverage its industry knowledge in reducing procurement costs.
Key objectives the client aimed to achieve through this engagement were:
- Develop a framework to increase quality, innovation, and flexibility.
- Identify sourcing locations that can ensure the availability of products at the best prices.
- Gain industry-specific data to address changing consumer needs.
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Our Research Approach
To help the client increase quality, innovation, and flexibility, the experts recommended an advanced product quality planning (APQP) framework to produce a quality plan which would support the development of quality products. This helped the client to meet AIAG guidelines, address IATF16949 standards and follow a disciplined approach to operations and business management. Additionally, the industry-specific data provided helped the client to choose their suppliers carefully to ensure differentiating products. The insights obtained helped the automobile manufacturer to respond to market fluctuations and changes in customer preferences.
The experts at SpendEdge performed a comprehensive automobile industry analysis to reduce production costs. They also identified key cost elements and devised procurement strategies to identify alternative approaches to procure goods. With the aid of SpendEdge, they obtained detailed market intelligence information on the supply market and supplier landscapes from specialized databases to assist the client in identifying the best cost sourcing location despite ongoing trade tension. Deep understanding of trade barriers in the best cost country sourcing locations helped the client to improve their supplier portfolio and reduce procurement costs.
The solution offered helped the automobile company to reduce production costs by 15%. The industry knowledge of experts further helped the client to identify best cost sourcing locations and engage with suppliers that could bring innovation.
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Products and Services that Make Up the Automobile Industry in the US
The automobile industry consists of the following products and services: