The Benefits of Integrated Procurement, Manufacturing, Sales, and Service Networks in Automotive Operations

The automotive industry has been a significant part of the global industrial landscape for over a century. However, today it’s still facing its biggest transformation yet. Yes, we are talking about the introduction of electric vehicle (EV) technologies and new connectivity features, like maintenance and road safety alerts. Then comes the changing mobility preferences of drivers, such as the rise in ride-sharing and private taxi services like Uber. All these changes had a huge impact on the automotive operations worldwide.

With car registrations increasing by around 1.4% across numerous countries, the path ahead isn’t without its challenges. Automotive manufacturers and suppliers must look for an efficient solution to deal with supply chain disruptions, economic uncertainty, and regulatory changes. All these factors can have an impact on profitability, stability, and future growth. The best recommendation here is to engage in integrated procurement, manufacturing, sales, and services networks for greater operational efficiency.

Current Challenges in the Automotive Industry

The automotive industry is facing numerous challenges in manufacturing new vehicles, driving technological improvements, and supplying automotive parts. The major ones include:

• Sustainability Challenges

Consumers’ preferences have been changing across the board and this is also true of what individuals usually expect from the vehicles they drive. There has been an increased focus on the need for sustainability, integrated technology, and mobility services. These trends have put more pressure on automobile manufacturers to develop and produce more environmentally friendly vehicles and reduce their operational carbon footprint.

• Technological Challenges

EV sales have already risen to a new extent in 2024, albeit not at the same rate as previous years. However, the transition towards electric vehicles has been problematic for many because of increased R&D costs, the need for infrastructure investment, and convincing the mass market to embrace new technologies.

• Economic Challenges

Automotive sales and production have been already impacted numerous times by global economic downturns and fluctuations. For example, higher production costs, availability and costs for skilled workers, and energy prices have hit businesses hard in Europe. The industry, including its manufacturers and suppliers, has still not fully recovered from the supply chain disruptions caused by the Covid-19 pandemic. Moreover, the inventory shortages have also impacted new car prices.

• Regulatory Challenges

Governments across countries are doing their bit both to incentivise consumers to purchase different electric vehicles, and to encourage the industry to make change. In March 2023, the EU Council introduced a regulation to set stricter CO2 emissions performance standards for new vehicles. It aims to reduce emissions from road transport, something that will push the industry to shift towards zero-emission mobility while driving innovation. However, meeting these targets impacts manufacturing, which some businesses will struggle to adapt to with time.

Role of Procurement, Manufacturing, Sales, and Service Networks

Procurement plays a pivotal role in addressing the above challenges for many automotive manufacturers and suppliers. Taking a strategic approach can help organizations combat economic uncertainty, regulatory changes, and increased competition from emerging players. This will also enable them to deal with supply chain disruption and the complex technological transition to EVs.

Here is a look at how procurement professionals can embrace technology and reshape the automotive industry through efficient manufacturing, sales, and services.

• Strategic Sourcing and Cost Management

Strategic sourcing is essential in the present context with complex supply chains to explore where cost and quality are key factors. Any business can balance the costs and risks associated with market volatility by diversifying its supplier base across geographical regions and implementing systematic evaluations of suppliers.

In the past, numerous automotive companies limited their supply chains to specific suppliers or parts manufacturers to keep disruption to a minimum. This further extended to focusing on global sourcing to ensure the best automobile prices. However, increasing the supply base, as well as looking at suppliers closer to the locality, provides more flexibility to meet demand. This, in turn, helps ward off the risk of cost fluctuation.

• Compliance and Regulations

Stringent emissions regulations may shake things up, but it’s the job of all automotive manufacturers and businesses to make sure all the materials and components they procure are helping them stay compliant. This is made much easier if the procuring happens with suppliers who already meet these standards. The implementation also applies to tools businesses generally use to support more sustainable sourcing.

For example, businesses may try working with a procurement platform that enables them to get what they need from vetted suppliers.

• Sustainability and Ethical Sourcing

The inevitable shift towards EVs means building an efficient supply chain that supports global sustainability goals. Clearly, procurement teams focus on procuring batteries and other EV-specific components. This also involves meeting indirect needs, such as IT equipment to handle all kinds of day-to-day operations. However, a strategic approach should always go beyond that, which involves working with manufacturers to secure long-term agreements for sustainably produced, high-quality products.

Bottom Line

The automotive industry is here to stay, but it needs to adapt to the current transformative landscape to ensure efficient manufacturing and sales worldwide. There is no denying that the industry faces numerous technological, regulatory, compliance, and cost-related challenges. That is why businesses must look for efficient alternatives to deal with such challenges and overcome them easily.

The best way to approach these solutions is to embrace an integrated procurement, manufacturing, sales, and services network across industries and sectors. This will enable the automotive industry to streamline operations, reduce costs, and enhance collaboration across the supply chain.