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Hartford Technologies Blog

Automotive Procurement Strategies for Manufacturers in 2019

Posted: Dec 20, 2018 1:30:00 PM

The automotive industry is in flux. Demand is falling, or maybe not. Autonomy is on the way, but perhaps not yet. Consumers want greener, safer cars, but they want performance too. And then there's connectivity: are cars really becoming cellphones on wheels?Forecasting is always difficult, but perhaps never more so than in the automotive sector as it stands today. Here we'll look at what all this uncertainty means for procurement and we'll offer some strategies to help.

Automotive procurement in an uncertain world

Volumes are unpredictable, consumer tastes are changing, the pace of model development is accelerating. Traditional procurement models risk locking companies into extended contracts for components with uncertain demand. (For evidence, look no further than the collapse of demand for diesels in Europe.)

Innovation is more important than ever, and start ups and new entrants see profit potential in automotive volumes. At the same time, they lack the industry knowledge and manufacturing mastery needed for enduring success. Tariffs are disrupting established supply chain economics and political environments are changing. It's a dynamic landscape so, when faced with these challenges, how should Procurement Managers respond?

Strategic OEM/Supplier Partnerships

The relationship should be based on trust and shared goals. This helps build an environment where the supplier can contribute to the OEM's objectives. Whether the focus is lightweighting, increased durability, higher performance or lower cost, a supplier that sees a partnership rather than a transaction is better placed to help.

Vendor relationships should be about the future as well as the present. When an OEM is willing to share details of future needs and concerns the vendor can initiate development efforts to suit.

Seek product and process mastery

Consistency is the hallmark of defined, well-managed processes, but achieving it isn't easy. Look for vendors with rigorous formal processes in place for quality and new product introduction. Their APQP processes should meet AIAG guidelines and operations should have IATF16949 standards. Further certifications such as ISO9001 and 14001 are additional indications of a disciplined approach to operations and business management that will assure continued success.

Look beyond the Tier 1's

Product expertise is spread throughout the automotive supply chain. While the Tier 1 manufacturers will continue to be the primary source of knowledge, don't overlook the ideas and capabilities that exist further down.

Think long-term and look everywhere

Stability is in short supply these days, and that puts automotive procurement professionals in a difficult position. How to avoid supply chain disruption and excess costs without increasing inventory and risking component obsolescence? And where will the next generation of innovative new products come from?

Here we've presented four strategies that will help ensure sustained success. If they were to be distilled down to a single phrase it would probably be this: build enduring relationships with highly competent suppliers through the supply chain.

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