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How changes to the Automotive industry is affecting procurement

Date: 13 May 2019

The automotive industry is on the cusp of major disruption. On the horizon are mass-produced electric vehicles fully connected to the Internet of Things, perhaps even ones that drive themselves. On-demand vehicles could change the way people own or rent cars, much in the same way streaming services disrupted audio and video. 

Therefore, many argue it is crucial auto industry players prepare their supply chains for these changes now to ensure they remain both competitive and innovative. 

''The disruption over the past years has led to a huge shift in focus on procurement for many companies, whether they are thriving or looking to save in difficult conditions,” said Jack Robson, head of Industrial Search  Procurement and Supply Chain for DSJ Global. “As a consequence, there is an increase in demand for high-performing procurement professionals, accustomed to the fast-moving automotive industry, making a very competitive recruitment environment.''

 

Procurement ship- supply chain

Decline of Diesel


Those in the industry need only look to the current situation with diesel, a once reliable segment particularly in Europe. The 2015 Volkswagen scandal, where it was revealed the company was cheating on emissions regulations triggered a major reduction in sales. Both consumers and enterprise are shying away from them as cities such as London are banning them from their centres. In 2017, diesel sales in Britain were off by 30%.  

As a result, automakers and suppliers had to quickly come up with new strategies in order to combat the steep decline in revenue, including a reduction in the workforce. “'The increased competitive pressure and high investment needs are resulting in OEMs reducing their cost base; in some cases this has led to large numbers of job losses,'' Robson stated.

Rise of Electric

While many consumers have moved from diesel to regular petrol, a growing segment has been choosing hybrid or fully electric models. In 2018, sales were up 42% with some one million plug-in vehicles on the street. 

''Consumer electronic corporate organisations are beginning to set their sights on the automotive industry. As a result, there is currently a huge demand for purchasers specialized in electronic components for both Tier 1 and OEMs,'' he added.

Self-Driving Cars

Another aspect expected to change the industry is the introduction of autonomous vehicles, or self-driving cars and trucks. Competition remains fierce between old-school automotive such as GM or Toyota and relatively newer tech companies such as Google and Uber; many have been buying smaller technology companies in a bid to bring these vehicles to market first.

''Further growth in autonomous vehicles will be assisted through M&A and spin-offs, leading to an increase in demand for procurement talent. Companies that are not investing in innovation or change are less likely to attract the exceptional talent that has so much choice in today's market,'' Robson stated. 

Car Sharing

As cars become smarter, humans may think twice about needing them at all times. Technology used for other on-demand services is being adapted to create car sharing services which are poised to upend supply chains surrounding both rental companies as well as traditional sales models. Executives in China are predicting the decline of ownership and the introduction of fleets of autonomous vehicles interacting with smart cities. Robson speculated this could create new partnerships that seek experienced automotive procurement specialists.

Conclusion

With arguably the most advanced, fast-moving and complex practices in the world, automotive businesses need to continually look for innovation and optimization of their supply chain functions. As the industry shifts, new players are now competing for these procurement experts.

“The demand for talent is very high and therefore leading to a competitive job market. Companies need more than a big name to attract the professionals that will take them to the next level. It is important their recruitment processes are keeping up to speed with the changes of the industry to ensure companies do not miss out to competitors,” added Robson.

If you are a procurement professional in the automotive industry and seeking advice on hiring or looking for your next career move, contact a DSJ Global representative today.
 
 References:
https://www.rolandberger.com/en/Publications/Global-Automotive-Supplier-Study-2018.html
 
https://www.kerkhoff-consulting.com/en/press/press-reports/press-details/news/beschaffungstrends-in-der-automobilzulieferindustrie.html?tx_news_pi1%5Bcontroller%5D=News&tx_news_pi1%5Baction%5D=detail&cHash=10f2394d439fcfc5a373cc325792a3a9
 
https://www.spendedge.com/blogs/trends-procurement-automotive-industry