LONDON--(BUSINESS WIRE)--SpendEdge, a leading procurement intelligence firm, has recently announced the completion of its latest Q&A article on the US automobile industry trends and the best strategies to sustain profitability amidst volatilities in this industry. In this article, Tridib Bora, Assistant Manager - Custom Research, shares his views on the current scenario in the US automotive industry and the best procurement strategies that will help address the imposing challenges in this industry.
Key Excerpts from the Q&A Session on the US Automotive Industry
According to you, what are the most critical factors that are creating challenges in the US automotive industry?
Tridib- The advent and the gradual acceptance of electric vehicles will act as a major disruptive factor for the American car manufacturers in this industry. With the improving economic viability of electric vehicles and the prevalent regulatory framework that is favoring the proliferation of this vehicle, American car manufacturers are struggling to be on par with this automobile revolution. They are being compelled to shell out an enormous amount of investment into their R&D activities that are increasing their OPEX to a significant extent. They are compensating for this expenditure by increasing the market price of the manufactured vehicles in the US automotive industry that is resulting in plummeting car sales in the industry. In my opinion, the popularity of car-sharing applications such as Uber, Zipcar will further inhibit the idea of car ownership that is now being perceived as a matter of luxury.
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Are you hinting at the American car manufacturers as the most adversely affected section because of these challenges in the US automotive industry?
Tridib- Not entirely! The challenges that the American car manufacturers are facing will ultimately impact buyers in the form of uncertain procurement terrains, reduced viability of suppliers, and most importantly, inflationary procurement spend in the US automobile industry. Buyers will have a hard time bringing stability in their price strategies owing to the dynamic cost structures of the American car manufacturers. They will face immense challenges to achieve a favorable supplier relationship management in the US automotive industry which is characterized by an uneven demand and supply ratio. In the recent times, the US automotive industry witnessed a series of mergers and alliances among some of the major players in this industry to consolidate the concepts of electric vehicles and traditional combustion engines on the same platform. This will not only render supplier selection difficult but also hinder buyers from wielding their negotiation levers with suppliers in the US automotive industry.
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What are the procurement strategies you think must be adopted by buyers to address these uncertainties in the US automotive industry?
Tridib- The US automotive industry will be punctuated with extremely dynamic prices of automobiles and their associated components. This makes it essential for buyers to partner with suppliers who implement BOT models. The concept of the BOT model involves payment to suppliers on the basis of manufacturing costs. This will result in a significant reduction in the buyer’s ad hoc spend and procurement cost. Additionally, the implementation of the BOT model will help share the operational risks between the buyers and the suppliers. Fluctuating raw material prices will play as critical cost components in the OPEX of the American car manufacturers which will have an inflationary impact on the procurement expenditure of buyers. To offset the same, buyers should partner with suppliers who can forecast the demand and prices of raw materials by using effective predictive analytical tools. Supply chain risks are one of the common procurement obstacles in the US automotive industry. This makes it essential for buyers to deepen their focus on rationalizing the supply chains to reduce the risks that arise due to many echelons in the supply chain. It also assists in consolidating several category-centric spend areas, which reduces accounts management efforts for buyers in the US automotive industry.
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Links to case studies of how SpendEdge helped enterprises in the automotive industry overcome challenges pertaining to the current conditions of the US automotive industry:
- MINIMIZING RISKS AND REDUCING END-TO-END SUPPLY CHAIN COSTS FOR AN AUTOMOTIVE COMPANY
- SUPPLIER PROFILING: A CASE STUDY ON HOW PERFORMANCE ASSESSMENT HELPED A CAR MANUFACTURER TO REDUCE SOURCING COSTS BY 19%
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