Author: Associate Vice President, Marketing Strategy, SpendEdge.
Case Study Overview
| Client | Industry | Solution |
|---|---|---|
| Automotive parts manufacturer | Automotive parts | Supplier benchmarking process to select the best-fit supplier |
Overview of Automotive Parts Industry
The global automotive parts market is a vast and dynamic industry, driven by the increasing production of vehicles and advancements in automotive technology. It encompasses a wide range of components, including engines, transmission systems, electrical systems, brakes, and interior and exterior accessories. Key trends influencing the market include the growing demand for electric vehicles, which requires specialized parts like batteries and electric drivetrains, and the emphasis on lightweight materials to improve fuel efficiency. Additionally, stringent government regulations on emissions and safety standards are prompting manufacturers to innovate and improve their offerings. Major regions contributing to the market include North America, Europe, and Asia-Pacific, with significant growth in emerging markets due to rising vehicle ownership. The market is also characterized by intense competition among key players, leading to continuous advancements in quality, technology, and cost-efficiency.
About the Client
As the automotive parts industry faces surging demand in the electric vehicle sector and increasing government regulations on carbon emissions, companies are grappling with the challenge of finding and engaging partners who can effectively address these evolving trends. An automotive parts manufacturer based in Southern Europe aimed to understand and adapt to the shifting market dynamics but struggled without the right strategic partnerships.
The Business Challenge – Supplier Benchmarking
The client was uncertain about the optimal strategy for identifying and partnering with suitable suppliers that could provide the raw materials and components necessary for manufacturing automotive parts. This need arose due to the growing demand in the electric vehicle sector and the need to comply with government regulations on carbon emissions. They approached SpendEdge for guidance in implementing supplier benchmarking points, strategies, and solutions.
Why Automotive Supplier Benchmarking Matters: Understanding its Significance
- The automotive industry and automotive research firms have recently introduced several transformative trends, including electric vehicles, automation, and highly cyber-oriented systems. These innovations have created a competitive, challenging, and dynamic market for automotive suppliers, prompting industry leaders to leverage supply market intelligence and supplier benchmarking to thrive
- Selecting the right supplier has become crucial for the success, growth, and sustainability of companies in the automotive industry. Over the past decades, the sector has recognized the importance of strategic supplier partnerships in navigating various internal and external factors such as environmental concerns, rising fuel costs, increasing consumer demand, evolving preferences, and government regulations on carbon emissions
- By forming robust partnerships with the best-fit suppliers, businesses can enhance efficiency, profitability, and productivity, while reducing costs and mitigating major risks. Supplier benchmarking allows automotive companies to identify ideal strategic partners, foster sustainable relationships, and secure high-quality, competitively priced products and services essential for their operations
Methodology Adopted to Address the Challenge
Leveraging its expertise, SpendEdge analysts identified a long list of suppliers who met the clients expectations, operational and functional capabilities, industry standards, and the ideal benchmarks for strategic partnerships.
Five Stages of the Supplier Benchmarking Process
Planning:
Understand company needs, goals, and requirements, and conduct in-depth market research to identify optimal prices, quality, and partnerships, ensuring clear expectations and targets
Collection of data:
Research and gather data on potential partners’ performance, prices, technology, specific compliance certifications, green tech for parts, sustainable raw materials, and ethical sourcing, while reviewing client feedback to make informed decisions
Analysis:
Evaluate and implement insights from collected data to select the best-fit supplier, ensuring they meet company benchmarks and expected offerings through interviews and discussions
Implementation:
Negotiate based on planning, data, and analysis, considering industry standards and market dynamics, to establish mutually beneficial agreements that meet automotive industry benchmarks
Monitoring:
Continuously track and evaluate market dynamics and performance metrics to ensure partnerships meet expectations and industry standards, fostering collaborative and strategic relationships
Outcomes
Through SpendEdge’s benchmarking process, which involved a detailed comparison, evaluation, and selection of the best-fit suppliers among the 10 shortlisted suppliers across the world for metals and another 5 suppliers for components, the company finalized a contract with a robust, collaborative, and supportive partner. This partnership not only facilitated sustainable growth but also provided insights into emerging technological trends, ensured updated equipment and offerings, and aligned with the manufacturer’s business targets and goals. The result was a mutually beneficial, positive, and strong partnership that positioned the manufacturer for continued success in a rapidly changing industry. Also, SpendEdge provided advisory on technology innovations and other sustainability empowerment that would be brought in by the suppliers.
