3 Ways Arkestro Can Assist With Your Automotive Sourcing Strategy

Updated July 2024.

Automotive sourcing is complicated, and few supply chains are as complex. Manufacturing is a global endeavor, with assembly plants located across the world – many of which work on a “just-in-time” basis.

New vehicles contain thousands of parts, ranging from tiny screws to highly sophisticated computer chips. Producing those thousands of components is a unique structure of tiered suppliers.

There is a dependency between these tiered suppliers as well as between the suppliers and original equipment manufacturer (OEM). Automotive parts shortages add to the layers of complexity in your automotive sourcing strategy.

Not only that, but automakers and auto suppliers face a very challenging environment. Overall vehicle sales are flat, however automaker requirements are extremely volatile, quickly down shifting from a major focus on developing BEV (battery electric vehicles), to add many new HEVs (hybrid electric vehicles) and re-start ICE (internal combustion engine) programs that were slated to balance out.

Auto suppliers are scrambling to keep up and automotive supplier margins are down several points. Suppliers are desperate for cost reductions and are looking for procurement to lead these efforts.

Sourcing Scenario

Picture this, you are on an automotive sourcing team (or maybe you don’t have to imagine because you already are!), for a popular electric vehicle company. The pandemic has already negatively affected raw materials you source from your usual Tier 3 suppliers to build vital vehicle parts.

Currently you are facing a global chip shortage which is expected to last until 2024. You must manually sift through your tangled web of suppliers to see if any can help. If not, you may have to shelf production of vehicles until they are able to be completed!

You already have pressure on you to track shipping costs, currency conversion, and tariffs. To top it off, you are tracking all of these variables using spreadsheets (gasp!), which is a recipe for disaster.

How do you source parts or raw materials at a competitive price, while fulfilling all your requirements and also adhering to the just-in-time needs of automakers? In the face of a crisis like a chip shortage, how do you prioritize among your suppliers to decide which is critical and possibly worthy of assisting to ensure your survival?

A collection of spreadsheets is not going to cut it for your automotive sourcing strategy. Legacy spreadsheets are chaos at the best of times.

Stop Fighting Fires and Suppliers

Ginia Snyder, Director of Global Procurement at Stoneridge, shares this real-life sourcing pain point that her team is facing daily:

“Right now, we see an extraordinary amount of price increases coming through from our suppliers. My team is spending a lot of their day-to-day time trying to work through those price increases and validating the information making sure that the approvals that we do give are in alignment with the market. So, we’re not able to focus on the strategic initiatives that we want to go forward with. It is all day-to-day firefighting.”

You don’t have time to fight fires every day. Arkestro’s Predictive Procurement Orchestration (PPO) uses behavioral science, game theory and machine learning to ingest information to reveal insights that drive action for optimal results – so you don’t have to!

Leveraging the power of artificial intelligence (AI), Arkestro delivers a series of benefits for your automotive sourcing and procurement strategy. We outline three of them below.

1 – Gain Efficiency by Reducing Manual Tasks

The most obvious benefit with utilizing Arkestro is the elimination of mindless, repetitive tasks. Sourcing professionals using traditional systems spend much of their time manually completing tasks such as data entry and logging.

At our previous Optimal conference, Jeoffrey Burris, owner of Advanced Purchasing Dynamics, Inc., had this to say regarding administrative work on our automotive panel:

“Procurement professionals in the automotive industry spend roughly 60% of their time on administrative work if they haven’t embraced digitization. When you have a highly manual process, it’s slow, and it’s not always accurate. That erodes trust within the organization for the procurement department and can be the biggest value loss that occurs when you’re not operating at maximum efficiency and accuracy.”

AI and machine learning make quick work of manual tasks, freeing up automotive sourcing personnel for more challenging responsibilities and eliminating the errors that can result from being stuck manually performing repetitive tasks for much of the day.

You can also say goodbye to those spreadsheets! Keep track of your pricing insights within the system. This is especially helpful given organizational changes due to retirement and the impending threats of a recession. Rest easy knowing that this information won’t simply disappear.

2 – Ingesting Information for Optimal Outcomes

There are very few companies (if any) where the sourcing department works completely independently, serving as the sole point of contact with suppliers.

The more typical scenario involves supplier team members in contact with various departments and individuals at an organization, from the sales team to customer service. It’s more than likely that each of these departments hold information on different systems, utilized throughout the sourcing cycle, creating siloes.

The good news is with Arkestro, communications with suppliers all take place within the system in real-time. This includes messages, reminders, tasks, file sharing, and schedules.

We can also ingest all of your spend data across multiple platforms so that we can understand your buying trends and can start to understand how you purchase.

Let Arkestro sort through your tangled web of tiered automotive suppliers! Based on your data, we’ll recommend the right supplier and prices for your automotive needs, giving you the speed and confidence to make your best purchases.

3 – Proactively Manage Your Supply Chain

In addition to ingesting your internal data, Arkestro also consumes external data such as firmographics, ESG, and risk data. This allows the software to understand not only what is being done in isolation but how you might be impacted by the world around you.

We also track and manage all aspects of your company’s supplier information in one database, in real-time. This means you can make decisions quickly under difficult conditions like a chip shortage, when working closely with your key, at-risk suppliers.

Proactive supply chain management is more than just a sourcing trend, it is a business imperative. Arkestro is the predictive procurement orchestration software that brings order and strategic decision making to the chaos of automotive sourcing.

We eliminate wasted efforts so that you can ensure that all your procurement cycles look like your best procurement cycles.

Want to learn more about what AI and machine learning can do for your automotive sourcing strategy? Read our latest report co-created with Emerj Artificial Intelligence or check out this panel discussion with auto industry experts as they dive into the future of automotive procurement with Arkestro.

Schedule a demo today to see how your organization can benefit from Arkestro.