To establish an internal supply chain and master a branched procurement strategy, stakeholders should:
- Stay focused on innovation — keep up with the innovations coming out of our academic incubators and understand how they fit into the ecosystem of the future.
- Stay proactive — Evaluate partnership and acquisition decisions.
- Engage with each other in a meaningful way.
In all these efforts, automakers and suppliers will benefit from a more nuanced approach to their relationship. While it’s true that prices rule the roost of supply he chain, the impact of relationships on profitability cannot be overlooked. Studies such as the Labor Relations Index have repeatedly shown a positive correlation between profitability and close working relations. In the midst of industry turmoil, survival often depends on how quickly new relationships can be established and existing ones strengthened.
Suppliers also need to take the time to reassess their value through the lens of the impending electric vehicle landscape. Discussions with potential partners should not focus on the supplier’s current output, but on what that output reveals about the company’s core competencies.
For example, 80% of your company’s revenue comes from components historically designed for internal combustion engines. The question the company now faces is “How can our capabilities keep up with the growing EV sector?”
While this type of evaluation is nothing new, now is a good time to take a deeper look at a supplier’s ability to meet the evolving needs of automakers. This includes his three main options.
1. Develop new product sets organically. This may involve significant engineering/production changes.
2. Given today’s market, we acquire related companies that could come with record high valuations.
3. We typically create integrated solutions that require a blend of organically developed, acquired and purchased products.
Regardless of approach, companies must continue to invest in product development/acquisition and marketing strategies. Automakers must trust their suppliers to become reliable long-term providers as they evolve their product portfolios.
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