Technical article
Challenges Facing Automotive OEM Procurement: Strategies for Overcoming Them
Munich– Automakers and their supplier markets are facing massive challenges: the electrification of powertrains, autonomous driving, the pressure of regulatory requirements, and the need for flexibility due to volatile market conditions, to name just a few examples. Mastering these challenges in procurement while adhering to tight corporate targets will be the task of supply chain management over the next 5 to 10 years.
Older technologies must offset the increased costs of the new ones
Currently, older technologies and their components must offset the increased costs resulting from the new challenges listed above. Due to competition for market share in supplier markets, these emerging supply chains cannot currently be managed as cost-effectively.
Sustainability is taking on a new significance
From a strategic perspective, sustainability is already taking on new significance for new propulsion technologies. The purchasing departments of OEMs—that is, their supply chains—are responsible for approximately two-thirds of totalCO2emissions (product manufacturing, use, etc.). Why? Energy consumption along the supply chains exceeds the energy used in-house and during vehicle operation by a factor of many. Furthermore, the production of electric powertrains consumes many times more energy than that of conventional internal combustion engines.
New technologies must help achieve procurement goals
Internal combustion engine technology is already undergoing significant technical changes in order to meet NOx and CO emission targets for 2021 and beyond. In this context, the purchasing department acts more as an agent of the development team. Ensuring the future compatibility of the various powertrain technologies is the strategic task of the purchasing department—fuel tank components vs. battery cells or spark plugs vs. SCR catalysts.
New technologies must therefore also play a strategic role in helping to achieve future procurement goals in terms of cost, quality, flexibility, and innovation.
Additional Challenges for Procurement
The following procurement challenges remain: a broad scope of the procurement portfolio (ranging from systems to raw materials), a high degree of product variation within the product portfolio—sometimes accompanied by high demand volatility—modular and platform management, an ongoing trend toward localization with a focus on “landed cost,” ensuring access to raw materials and hedging against related risks, and more.
Implementation of strategic measures
The implementation of strategic measures is therefore the key task for achieving our goals for 2025 and beyond. Strategies should be formulated at the retail group level, the production technology level, and, of course, for strategically important suppliers. Strategic measures for key suppliers are already being launched today to ensure supplier development in areas such as autonomous driving, e-mobility, etc., and to strengthen our competitive position in these supplier markets in the future. The goal must be to empower suppliers that are already generating high sales today to enter new component markets or supplier markets.
KBC is your partner for comprehensive procurement strategies
KBC establishes (a) target systems for procurement organizations (horizontally) and breaks down the necessary target dimensions into measurable sub-targets (vertically), (b) aligns procurement departments with relevant analyses ranging from products to supplier portfolios and markets, as well as collaboration needs, (c) provides the necessary transparency to assess the current state of affairs, (d) provides a system for modular strategy development at the buyer level, and (e) implements concrete strategic measures to close the target gaps of retail groups in supplier markets.