Procurement Performance Requirements
The biggest problem for automakers is the painful transition to EASCY (Electrification, Automation, Sharing, Connectivity, and Year by Year). Certain "older" parts simply cannot be found, or the supplier goes out of business. This is a particularly volatile problem for the auto industry, and other industries do not necessarily face problems of this magnitude. Procurement needs to deal with this transition with uncertainty and complexity. This requires new ways of procurement and may even involve mergers and acquisitions.
Another important issue to consider with regard to future performance requirements for procurement is the need for transparency and new ways of working. As data volumes and network complexity increase, ensuring transparency at every supplier level throughout the supply chain becomes the responsibility of procurement. As internal and external business partners adopt new ways of working, such as sprints or scrums, procurement needs to emulate and adopt these working modes. Otherwise, business partners will start to shy away from purchasing and label it slow and obsolete. A radical change in the value creation model, real-time transparency of the entire supply chain, automation of most strategic and tactical tasks, complete outsourcing of non-critical commodity procurement near the end, etc., are all happening within the automotive industry.
What efforts are automakers making in e-Procurement?
Before considering how your company might embrace certain options, it is important to clarify: should your company’s procurement function be positioned as an efficiency machine, or as a value generator?
Your answer should be based on current business needs. If a company positions procurement as a value generator, the focus shifts to managing and sourcing partnerships, revenue generation, profit-based sourcing, and sourcing innovation. However, there is one caveat. When procurement is regarded as a value generator, it must also pursue efficiency.
If the company takes the road of efficiency, the procurement will become low-cost, low-employee and low-risk. In this case, it is best to pursue all aspects of future scenarios that support this intent.
Solutions that are already being tested by automakers or suppliers fall into three broad categories:
- 1. Management approach, business model, processes and roles
- 2. Institutions, resources and skills
- 3. Methods/levers, systems and tools
One example is that procurement adjusts supplier lead times to accommodate modular production concepts. This is now possible as the increasing use of digital simulation has resulted in shorter production-order-to-delivery times and accelerated work times.
Other things that automakers and suppliers are trying are: building/strengthening institutions, building/strengthening software, battery and fuel cell purchasing capabilities, or working with insurers to manage supplier risks in partnerships with apps and advanced analytics. Such applications and analytics support more efficient use and sharing of internal and external information.
Some companies have dedicated teams in digital labs to research and experiment with new technologies, such as robotic process automation, artificial intelligence and blockchain. The goal is to test automated supplier negotiations and find opportunities to reduce costs through pattern recognition.
What are your current pain points and priorities in automobile procurement?
It is important to find a balance between new tools, technologies and trends that will shape procurement and demand today. Assuming your company positions procurement as a value generator, the roadmap your company creates from analysis may contain a large number of steps and measures, possibly as high as 80% that are rooted in the evolutionary development of procurement. The rest might make procurement look like a command center. In some companies, this ratio may be 70/30 or 60/40, but the key is that companies need to consider evolutionary realities and implement evolutionary development of procurement. In other words, you need to use creative procurement applications to push away boundaries, but businesses also need to apply them to what is possible today, recognizing that being a value generator is a big part of increasing efficiency and utility.
The unique features of 8Manage e-Procurement make it easy for automakers to ensure lean processes and ensure compliance with the highest industry standards. This helps automakers stay competitive in a challenging environment. Using 8Manage e-Procurement software, automakers can achieve the following results:
- Purchase order process costs are reduced by up to 80%
- Invoicing process costs are reduced by up to 70%
- Receipt management costs are reduced by up to 30%
- Resources are focused on strategic tasks (cost, risk and innovation)
- A successful global business transformation process
In the field of electronic sourcing, we provide support that goes beyond the traditional process concept RFI - RFQ - eAuction. In addition to features such as Linear Performance Pricing (LPP) and raw material benchmarking, we also use the detailed data from the RFQ Benefit Statement for statistics. This makes it very easy to have constant control over raw material trends in the final product.
Supply chain management is key to ensuring that deliveries meet demand. Unlike pure Electronic Data Interchange (EDI) service providers, where we provide complex logic in ERP systems, EDI works based on received documents. To ensure supply and ensure transparency, many customers use a combination of delivery schedules, branded shipping notices and Vendor Managed Inventory (VMI).
We have expertise in integrating logistics service providers, package management and manufacturer part numbers. Because of our long-term supplier declaration, we achieve automatic customs clearance. Our Document Approval Exchange Module simplifies the time-consuming and value-added process of exchanging documents with suppliers. This module facilitates the exchange of various types of documents, such as drawings, process descriptions, standards or chemical registration, evaluation, authorization and restriction (REACH) documents.
Quality management in the automotive industry is the standard for all other industries. Like the EDIFACT standard in logistics, we are one of the first companies in the world to develop a QDX standard and also work closely with the world’s leading automotive suppliers to establish a standardized quality portal that includes the exchange of quality information.