It isn’t news that the automotive industry has faced a long list of challenges since the beginning of 2020. The initial factory shutdowns across the globe set off a domino effect of issues related to material availability, extended lead times, cost increases, labor shortages and even microchip shortages.
Original equipment manufacturers (OEMs) and suppliers are seeking a way back to pre-pandemic levels of production. However, the problems that existed before the pandemic will still be waiting.
The truth is that the industry is changing in major ways. In addition to evolving technology, globalization and environmental concerns, the emergence of autonomous and electric vehicles are changing supply chain best practices, requiring suppliers and manufacturers to adjust to keep pace.
Now, automotive OEM suppliers need to provide more than the typical, “traditional” offerings. Investing resources into supply chain management, implementing risk mitigation strategies, creating improved procurement strategies and investing in new machinery and processes are all necessary steps if automotive OEM suppliers want to help manufacturers save time and costs.
Supply Chain Management
According to speakers at the recent Automotive Logistics and Supply Chain North America Live conference, outsourcing is a cost-effective solution to cope with change. Hiring an OEM supplier that specializes in producing a set of components means you do not need to invest in specialized technicians or expensive equipment.
Over the years, OEM suppliers have played a key role in supply chain optimization management strategies, such as:
Supply chain diversification, illustrated by manufacturers moving portions of their production outside of China to reap the benefits of partnering with lower-cost companies in countries across Southeast Asia.
Core production competencies, so manufacturers do not need to invest time and resources into certain production processes and can rely on outsourcing as a solution.
Optimized forecasting and inventory management to improve fulfillment and product availability, reduce unneeded inventory and reorganize to improve margins and profitability.
The use of new technologies to improve everyday processes, workflows, field sales, marketing and direct services to the customer.
A multichannel approach to monitoring trends and customer demands.
Your OEM supplier can no longer only offer manufacturing services. Instead, they need to be a strategic consultant to ensure you get the best deals in the context of the global market.
Like other sectors of the manufacturing industry, automotive manufacturers function in a global environment subject to political, economic, environmental and marketplace factors. This means that interruptions can manifest in the form of:
Retaliatory tariffs that are illustrated by cost increases.
Natural disasters that disrupt facilities, delivery and logistics.
Shifting consumer demands, such as the latest shift toward electric vehicles and environmentally friendly solutions.
These impacts are, at times, inevitable. However, having a risk mitigation strategy can settle some of these issues through analysis of the automobile marketplace, risk identification and prioritization, and a contingency plan.
Fluctuating material costs are no secret in the automotive industry — or any industry, for that matter. As reported in an article from Forbes, many manufacturers engage in what is commonly known as “arms-length” procurement relationships, meaning they do not develop relationships with suppliers that allow them to capitalize on the supplier’s expertise. However, closer relationships can result in better deals, higher lead times and insights into raw material costs.
All of your partnerships—including work with an OEM supplier—should have a strong investment in procurement. If they can attain lower costs, those costs are, in theory, passed down to you. At a minimum, procurement strategies should:
Provide visibility into expenses on both a fixed and variable basis.
Produce robust contracts and agreements.
Run financial models and predictive analytics to understand changes in cost.
Audit pricing and costs regularly.
Producing high-quality precision components is the foundation of a reputable automotive OEM supplier, but it’s also necessary that equipment and processes develop to provide the most cost-effective services.
Automobile recalls are often a result of oversight and neglecting process and equipment audits. This not only damages a company’s revenue and reputation, but also the quality of the components and products.
To avoid low-quality manufacturing, OEM suppliers need to:
Perform frequent internal quality management checks on manufacturing processes.
Perform external audits of suppliers and manufacturers to ensure adherence to quality standards.
Test to identify potentially faulty parts.
Invest in state-of-the-art machinery and technology.
Save Time and Money With VPIC Group
For nearly 30 years, VPIC Group has been dedicated to quality, precision component manufacturing and excellent customer service. As the industry has changed, we have been quick to develop supply chain teams, implement risk mitigation strategies, create improved procurement strategies and invest in machinery and new processes. We have done all of this to ensure that our customers are satisfied and thriving in the automotive industry.
If you think our processes and dedication to quality and customer satisfaction could help you, contact us today. We look forward to hearing from you.