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Challenges for the purchasing departments of automotive OEMs and their suppliers

Automotive manufacturers and their suppliers are faced with massive challenges. These include the electrification of drivetrains, autonomous driving, tense regulatory and flexibility requirements due to volatile market situations, to name just a few. Mastering these challenges in Procurement while maintaining the company’s intense targets will the objective in supply chain management for the next 5 to 10 years.

Older technologies have to compensate the cost increases of the new ones

At present, older technologies and their components must compensate for the cost increases caused by the new challenges listed above. These supply chains, which are in the process of being established, are currently less able to handle cost pressures due to the distribution battles on the supplier markets.

The sustainability objective is already taking on a new significance

From a strategic perspective, the sustainability objective is already taking on a new significance for the new drive technologies. The procurement departments of the OEMs, i.e. their supply chains, are responsible for about 2/3 of the total CO2 expenditure (product creation, use, etc.). Why? The energy consumption along the supply chains exceeds its own consumption and that of vehicle use many times over. The manufacture of electric drives is also much more energy-intense than conventional combustion engines.

New technologies must make their contribution to meeting purchasing targets

Today, combustion technology is already being subjected to significant technical changes to achieve the emission targets for NOx and CO for the years 2021ff. In this regard, Procurement is more likely to act as a subcontractor to Development. The future safeguarding of exchange effects between the various drive technologies – tank components versus battery cells or spark plugs versus SCR catalytic converters – will be the strategic task of Procurement.

The new technologies must therefore also strategically contribute to achieving future purchasing targets in terms of costs, quality, flexibility and innovation.

Further Challenges for the purchasing department

The continued procurement challenges include: The large range of the procurement portfolio (from the system to raw material), high variant diversity within the product portfolio with high demand volatility in some cases, modular and platform handling, a sustained localisation trend with focus on “landed costs”, securing access to and hedging against risks of raw materials and many more.

Implementation of strategic measures

The implementation of strategic measures is therefore the central task for achieving the 2025ff target. Strategies should be formulated at the levels of trade groups, production technologies and, of course, strategically important suppliers. Strategic measures for important suppliers have already commenced to safeguard supplier development for issues such as autonomous driving, eMobility, etc. and to strengthen the future competition in these supplier markets. The objective must be to empower suppliers who already denote strong sales volumes for new components or supplier markets.

KBC is your professional partner for integrated procurement strategy

KBC establishes (a) target systems for procurement organisations (horizontally) and cascades the necessary target dimensions to measurable sub-targets (vertically), (b) aligns procurement departments regarding relevant analyses on product, supplier portfolio or market and cooperation requirements, (c) supports the necessary transparency to determine the status quo, (d) provides a system for modular strategy development at buyer level and (e) implements concrete strategic measures to close the target gaps of retail groups in supplier markets.