Trends in Automotive Sourcing

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Sourcing in business means to select goods or services to help to run the business smoothly. Coming to the automotive industry, there are many important decisions, which can considerably affect the business. In this rapidly changing market across the globe, innovation and reinvention are the two key attributes to create a difference. Some of the key trends in automotive sourcing are as follows:

Supplier diversification

Earlier automotive companies would work with a limited number of manufacturers or suppliers. This involved a huge risk because if any supplier failed to meet the expectation, the final output was affected. To reduce this risk, currently many companies have adopted the strategy of supplier diversification. In case there is an increase in demand or a company needs high speed to the market, an increase in the supply base with help in gaining flexibility to ramp up capacities. Similarly, on the supplier side, they can serve multiple OEMs rather than just one as in the past.

Strengthening supply chain collaborations and cross-functional relationships

For automobile companies, having a long-term partnership with manufacturers and suppliers are immensely important. Cross-functional relationships have become more crucial than before as cab aggregators have come up with ride sharing facilities. So, it is important to make collaborations with services or providing linked services. From a procurement point of view, this means that you have to identify ways of outsourcing services, support businesses to build long-term contractual relationships. If suppliers are disappointed with automakers, it can lead to hindrance in the manufacturing process.

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Sourcing closer

Global sourcing is something, which has been used by automobile companies for decades. Choosing the best country for sourcing still remains a crucial decision for all industries. However, currently it has come to notice that countries, which have been previously considered low-cost, are no longer the same. Costs have become equitable across different regions. Since this benefit is lost, other risks involved in global sourcing are becoming more costly like more logistic costs, long supply chain and cost fluctuations due to macroeconomic conditions of the sourcing country.

Holistic costs efficiency focus

The entire product life cycle and value chain focus on minimising costs. Efficient procurement alone cannot save mistakes done at R&D level or other decisions. A synergy should be established across the entire product lifecycle, which would help in establishing a holistic cost efficiency across the entire process. Procurement teams can work with other strategy teams to identify opportunities for process complexity reduction, value engineering etc.

Technology and data leverage for improving processes involved in sourcing

Technology is very important to provide differentiation in the current clustered market. There should be a well-structured category and sourcing strategy and application of sourcing technologies. Data analytics and business intelligence can be combined together for cost optimisation and identifying new business opportunities. Such usage of technology can be very well seen in online casino industry wherein a good number of non-UK sites are able to efficiently market their services to Gamstop-enrolled UK players.

Conclusion

Automotive industry sourcing is an important part of the supply chain of the automotive industry. So, companies should take informed decisions to ensure the desired outcome.