How Does Supply Market Intelligence Support Automotive Industry Procurement?
The automotive industry has experienced substantial change and growth over recent years, incorporating new technology, changing needs, data and analytics, and supply market intelligence into their supply chain and operations. A field within the industry that has seen a significant transformation is automotive industry procurement. With the advent of data, research, and analytics-driven processes, systems, and strategies, chief procurement officers (CPOs) require a more comprehensive understanding of their market, major trends, industry developments, and changing perspectives. Automotive industry procurement involves identifying and navigating profitable opportunities, attracting and collaborating with local suppliers, tracking and overseeing performance of suppliers and procurement processes, and making necessary changes to improve overall company growth. Supply market intelligence provides significant and relevant information procured for decision-making in the sourcing and procurement departments, and businesses must utilize to help build a resilient supply chain. Efficiently carrying out automotive industry procurement can help companies achieve sustainable growth, surpass competitors, keep pace with evolving markets, and meet consumers’ needs with ease.
What are Five Best Practices in Automotive Procurement?
Collaboration and Cross-Functional Relationships: To keep pace with a rapidly evolving and challenging market, companies require sustainable and functional partnerships and develop mutually beneficial relationships. The rise in app-based and ride-sharing services has contributed to a decline in personal vehicle ownership, requiring automotive companies to capitalize on strong partnerships that appeal to consumers’ current needs. Incorporating technology, AI, and electric vehicle systems can help companies link services, collaborate, and produce better offerings. Consumers have become increasingly particular about features, and to support these demands, companies must develop long-term relationships, strengthen their supply chain, and keep pace with changing preferences.
Local Sourcing: While global sourcing has become an increasingly popular method in many industries, leading automotive companies have turned to local sourcing as a preferred sourcing and procurement method. Some major reasons for this change, is the equitable costs across regions, ease of access, possibility of high risks. To ensure that your automotive industry procurement is efficient, companies must identify local suppliers and sources, and develop highly cost-effective methods of sourcing. This helps reduce high logistics costs, reduce tax expenses, improve speed-to-market, impact of cost fluctuations, and transport expenses, risks, and challenges. Global companies with branches in developing countries have shifted to local production and sourcing for ease and cost-effectiveness.
Cost Efficiency: The procurement department must aim to tirelessly reduce costs and maintain quality for an efficient and resilient supply chain. CPOs are continuously in search of a way to reduce costs and reduce potential risks and inefficiencies. Although most cost-reduction methods are targeted towards product and service costs, for automotive procurement, experts insist on developing a more holistic and long-term approach. Accounting for long-term costs such as taxation, limiting process complexity, changes along the product lifecycle, and value engineering are ways of mitigating unnecessary costs, staying prepared, making major changes to the company’s overall spend, and identifying cost-effective opportunities.
Supplier Diversification: Working with a host of valuable suppliers has proven to be more effective and helpful in automotive industry procurement, as compared to the traditional approach of collaborating with a limited number of vendors at a time. Supplier diversification is the process of establishing a wide base of suppliers to source from depending on company requirements, demand, technology needs, and other impacting factors. As companies grow and demand fluctuates, CPOs should be able to source any and all required products or services at acceptable prices, in limited time. This provides flexibility, cost-effectiveness, speed, and efficiency along the supply chain, and supports suppliers’ efforts to collaborate with multiple companies, or major OEMs.
Technology and Data: Software, technology-driven strategies, and digitization and contributing significantly to the change in the automotive industry procurement field, and companies must keep pace with these changes to maintain customer satisfaction. Utilizing data and analytics, sourcing technologies, supply market intelligence, and other research and tech-based systems can help improve efficiency, speed-to-market, reduce costs substantially, mitigate major risks and human error, and optimize the supply chain significantly. Additionally, research-driven business decisions can help meet market demand, stay ahead of the curve, understand the industry, identify profitable opportunities, and maintain a lead over competitors.
With the advent of electric vehicles, shortage and redundancy of fossil fuels, rising environmental concern, and high demand from customers, companies in the automotive industry are facing numerous challenges when it comes to procurement, sourcing, supply chain management, and maintaining efficiency. Due to this, an European automotive manufacturer witnessed a drastic change in speed-to-market, faced unexpected challenges, and could not keep pace with competitors. Unable to identify the cause, the company chose to partner with SpendEdge and leverage our expertise and supply market intelligence solutions to identify challenges within their automotive industry procurement department. Our experts closely analyzed the manufacturer’s operations, and identified various significant shortcomings in the strategies, systems, and approaches utilized along the supply chain. With this data, SpendEdge experts provided the automotive company with research-driven practices and recommendations, including leveraging technology, focusing local sourcing, identifying multiple suppliers, developing long-term partnerships, and implementing holistic cost-effective strategies. Soon after, the company recovered from their losses, developed a more resilient and supported supply chain, identified strong partners, and overcame the impact of past inefficiencies.