Technical article
Supplier support, from sales strategy to standardization
Munich – A long-established aluminum casting company must realign its production and organizational structure to meet the new demands of electric mobility and counteract the declining demand for components for internal combustion engines.
A German manufacturer of electronic systems and electrical products has suddenly become the focus of attention for German automakers.
The list of examples is long: the current disruptive transformation in the automotive industry—from internal combustion engines to electric drives—and the associated restructuring of OEM supply chains is forcing a large portion of the automotive supply industry to reposition itself with regard to electric mobility. In addition, it enables companies from outside the industry (e.g., in the fields of mechanical/plant engineering or telecommunications technology), which are coming into the OEMs’ focus due to the technological upheaval, to position and establish themselves as long-term and strategic suppliers.
Benefits of being a supplier to the automotive industry
The automotive industry is known for its high standards and difficult contract negotiations. Nevertheless, there are a number of factors that speak in favor of this highly competitive industry:
- Due to the very high purchase volumes and long-term contract periods, attractive economies of scale can be achieved.
- The high costs incurred by OEMs in industrializing supply chains and establishing production facilities with a long-term, strategic focus ensure a high degree of location security. Since new technologies—particularly in the field of electric mobility—require significant investment from suppliers, the supplier market also offers significant opportunities due to the limited number of competitors.
- From the OEMs' perspective, therefore, long-term supplier development and collaboration are advantageous for compensating for a lack of expertise through strategic partners.
- In addition, competition in the automotive industry is heavily dependent on the features and technologies integrated into vehicles (technological leadership). Suppliers are therefore in constant communication with OEMs regarding new innovations and technologies. This offers innovative technology companies and startups the opportunity to position themselves as potential suppliers to OEMs.
Supplier options
The strategic options available to suppliers can be broken down into three distinct areas: horizontal integration—building a broader product portfolio and leveraging synergies and economies of scale; vertical integration—increasing value creation by incorporating upstream or downstream process steps; and diversification—reorienting the business beyond its existing core competencies.
Knowing what customers want
Whether you’re repositioning your business or just starting out, the automotive industry is characterized by a wide range of requirements and quality standards. Thanks to our long-standing partnerships with various OEMs, you can draw on our dedicated expertise to establish a sustainable, long-term strategy. KBC supports you every step of the way, from aligning your sales strategy to preparing for OEM nominations. What does that mean in practice?
- Prior to awarding the contract:Analysis and preparation of market and competitive intelligence; networking with OEMs (introductions and placement); analysis of individual core competencies
- Regarding the contract award:Implementation and support for the preparation of bids—from planning, cost estimation, and simulation through to supplier management and the associated purchased parts and equipment.
- Scope of work:Developing and optimizing an effective negotiation strategy, as well as adjusting proposals and following up.