Automotive Procurement Masterclass: An Expert Perspective on Current Challenges and Future Solutions

If automotive procurement teams could predict when bridges would collapse, inflation would increase, or geopolitical tensions would resolve, they might resolve supply chain and cost challenges overnight. Absent clairvoyant capabilities, however, automotive procurement teams have to make do with what they do have — which can seem like little in the face of such a complex procurement environment. 

To help automotive procurement teams in their search for better solutions to ongoing challenges, Arkestro sat down with Drew Sheffield, the Principal at DS Group Advisors, to capture his perspective on the current and future state of automotive procurement. Below are excerpts of the conversation, but you can also see the clips or watch the whole masterclass here. 

Arkestro: Let’s kick it off by having a conversation about what we see going on in the auto industry. Before we dive in, Drew, tell us a little bit about yourself.

Sheffield: My name is Drew Sheffield. I’m a passionate, long-time automotive procurement leader. I worked at Ford Motor Company as a buyer up through purchasing director, then at two leading auto suppliers, TI Fluid Systems and ZF Group, as a global purchasing director. 

I founded DS Group Advisors almost four years ago to help manufacturers, including automotive, automakers, and auto suppliers, make procurement a competitive advantage for best cost, quality, delivery, technology, and risk. I’m also actively involved in a couple of advisory boards.

Agile Systems Key to Navigating Today’s Procurement Challenges

Arkestro: Sounds like you’re in deep with this industry! What are some of the key challenges you’re seeing automotive procurement teams face these days?

Sheffield: Great question. Many of the challenges they face are common year after year after year. This year, a couple of additional factors make those challenges even tougher. 

Meeting the company’s current cost-reduction challenges and meeting new model and price target challenges have been around forever and are major performance items. They are even tougher this year after multiple years of inflation, geopolitical tension, and then a number of global disruptions. 

The other one I touched on there is protecting supply. That’s typically the number one objective — everything else stops if you’re not protecting the supply of parts for your customers. That’s especially challenging this year with unforeseen disruptions — the Baltimore bridge collapse, global geopolitical issues, logistic disruptions, as well as ongoing chip disruptions, and others.

Arkestro: What kind of advice would you give to automotive procurement professionals who are trying to navigate these challenges, as well as looking at the technology requirements they have? 

Sheffield: They need to seek out new solutions — solutions that will allow them to improve the quality and speed of their sourcing events. Workload is a major challenge. 

They should find systems that allow them to learn from prior mistakes, learn from prior successes, and quickly continue their normal day-to-day work, like sourcing new programs, market testing, evaluating quotes, and selecting suppliers. If the systems allow them to not only do that for the addressable spend they currently manage but also address additional spend items that they typically don’t have time to manage, that would be helpful. There are a number of new solutions that could help them do that.

Preparing for Automotive Supply Chain Disruptions Through Strong Processes, Training, and Technologies

Arkestro: You mentioned the supply chain disruptions before, and we know they are an ongoing critical concern. Are there ways that procurement professionals can prepare for those kinds of shortages?

Sheffield: They can put strong procurement procedures and processes in place and train their teams to follow those best practices, learn from what’s working best globally for their company across divisions, and help ensure everyone takes advantage of that. 

In automotive, most companies have very strong purchase-component, purchase-part commodity, or part-family strategies — there are a lot of different names. Putting those in place and ensuring they’re cross-functional and strong gives you the roadmap to achieve your best cost, quality, delivery, technology, and risk value for your company.

Also, ensuring the sourcing and supplier management practices are taking advantage of new systems and new technologies is important. As I mentioned earlier, you want to capture those lessons learned, you want to speed up the process. Ideally, you want to actively manage a larger percentage of your spend — that’s where you can achieve those breakthrough levels of performance. 

You might focus on the Pareto Principle, where 20% of your commodities make up 80% of the spend. If you’re missing out on some of those, you’re missing out on the remainder of the commodity. If you can leverage a new system or technology to help you get involved with a large majority of your spend, that should be helpful as well and boost team performance.

Looking Ahead: What’s Next for Automotive Procurement?

Arkestro: Thanks for this conversation, Drew. It’s been a lot of fun. To end, let’s talk about what we’ve seen as trends. What’s going on now? What do you predict for the future of automotive procurement?

Sheffield: A few different things. The widespread adoption of new and better systems and technology within automotive procurement will be one. We’re starting to see that with Arkestro. You have a very large global automaker, and a mega-supplier who are very happy customers. 

You’ll see wider adoption of systems like Arkestro to improve operations and reduce buyer workload and “quote fatigue” that many buyers are experiencing that can be addressed through the Arkestro platform. It’s going to drive record cost reductions. The average cost reduction now is 16% for actual Arkestro clients. That’s impressive. Best-in-class companies typically achieve 4% or 5%, and that might even be high, given the inflationary environment. To see 16% is phenomenal.

I see best-cost country sourcing for value, as well as risk mitigation, continuing to be very, very important. I see more regional sourcing, based on looking at the import tariffs, ocean logistics, geopolitical risks, and desire to keep low inventories and free up cash. However, for some components, especially in automotive, there will still be global sourcing where it makes sense, such as Asia or other places.

Lastly, automakers and suppliers will continue to consolidate, spending with fewer suppliers across many spend categories. That enables better supplier relationships and better value. You want to be the customer of choice for your suppliers. That’ll earn you the best program support, you’ll get the “A” Team from the suppliers on your programs, best total cost, open capacity, and first access to new technologies. 

Doing all that, Arkestro can help enable you to be a customer choice. That’s where you’re going to be the big winner going forward — being that customer choice with your suppliers. The benefits are phenomenal. Big winners will come out of those who embrace the new technologies. Arkestro is a great example of one of those game-changing types of enablers in the procurement world.

How Arkestro Can Support Automotive Procurement Teams

As Drew mentioned, a new world of possibilities opens up for automotive procurement teams when they apply Arkestro’s Predictive Procurement Platform. Regardless of the bumpy road ahead, we can provide the needed stability, cost reductions, and process improvements to take your procurement function to the next level.

Arkestro’s solutions help automotive companies:

• Reduce transactional workload and manage a larger portion of total spend
• Ingest information for optimal supply chain results
• Improve supplier sourcing feedback, communications, and relationships
• Replicate and automate the best practices of your top-performing buyers

Are you ready to learn more about why automotive customers are increasingly happy with their cost savings and unlocked potential? Reach out or learn more about Arkestro’s work for the automotive industry here.