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Resources  /  Blog  /  Driving Cost Savings & Efficiency with Predictive Procurement Orchestration for Automotive
Sourcing Education

Driving Cost Savings & Efficiency with Predictive Procurement Orchestration for Automotive

July 6, 2023

The ripple effects of the COVID-19 pandemic are still rearing their ugly head in the automotive industry. Plant shutdowns, production disruptions, supply shortages, and demand surges wreaked havoc on the automotive world in 2020. And unfortunately, many of those same issues are major pain points for procurement teams today.

In 2022, automakers across the globe cut roughly 4.3 million cars from production due to ongoing supply chain issues and semiconductor shortages. And though 65% of semiconductor executives believe the chip shortage will improve in 2023, inflation, economic instability, and increased regulations still present a host of challenges for automotive manufacturers.

In this blog, we’ll take a look at the hurdles facing automotive procurement in the post-COVID era. Then we’ll show how autonomous, Predictive Procurement Orchestration (PPO) can help relieve supply chain issues, reduce costs, and help automotive brands navigate increased regulations.

What Are the Pain Points Automotive Procurement Teams Face?

The COVID-19 pandemic highlighted the vulnerability of global supply chains and the interconnectedness of industries. Now that the height of the pandemic is behind us, automotive brands are still struggling to create more resilient, contingent procurement and supply chain processes.

Here are some of the latest pain points facing automotive procurement:

Increased Regulations

Governments worldwide have been implementing increasingly stringent regulations related to emissions and fuel efficiency, safety and crash testing, and trade and tariff policies. Procurement teams are faced with new challenges related to environmental regulations, cybersecurity and data protection, and labor and human rights laws.

Cost Reduction

In the wake of economic uncertainty, some of the world’s biggest automotive brands are taking drastic measures to cut costs. General Motors announced it would be making $2 billion in cost cuts from 2023 to 2025, and the company recently laid off hundreds of full-time, contracted employees. Ford Motor also announced plans to cut about 3,000 jobs to reduce costs as the company transitions to electric vehicles.

Electric Vehicle Production

As governments worldwide aim to reduce greenhouse gas emissions and promote the use of renewable energy sources, more automakers are investing in electric vehicle (EV) production. In fact, EV sales are predicted to reach 40% of all U.S. passenger car sales by 2030. The transition is shaking up the entire automotive value chain, from sourcing batteries and electric drivetrains to retooling manufacturing facilities. 

electric vehicle charging

Localized Supply Chains

Many of today’s automotive brands are shifting to localized supply chains to reduce logistics costs, increase agility, and mitigate risks. Volkswagen is leading the trend with a new growth plan that aims to minimize vulnerability and increase sustainability in the supply chain. Though the move certainly offers benefits, it also creates new supply chain complexity, regulatory requirements, and challenges in maintaining standardization and consistency.

7 Ways Predictive Procurement Orchestration Benefits Automakers

In the face of so much volatility across supply chains, the economy, and beyond, PPO is a solution for overburdened, overwhelmed procurement teams in the automotive space. Autonomous procurement technology helps procurement professionals navigate volatile raw material prices, quality and compliance requirements, cost pressures, and so much more.

Let’s take a look at the many ways PPO benefits automakers:

1) Improved Demand Forecasting

By leveraging advanced analytics and historical data, PPO can forecast demand more accurately. It analyzes factors such as market trends, customer behavior, and historical sales data, and automotive brands can better anticipate demand for their vehicles and related components. This enables more efficient procurement planning, inventory management, and production scheduling.

2) Optimal Inventory Management

Automotive brands can optimize inventory levels with provided proactive insights into future demand patterns and lead times. By accurately predicting demand fluctuations, procurement teams can avoid excessive inventory holding costs while ensuring sufficient stock availability to meet customer demands.

people shaking hands in a warehouse

3) Enhanced Supplier Management

Unlock the ability to evaluate supplier performance and anticipate potential risks. By analyzing supplier data and historical performance, brands can identify reliable suppliers, anticipate potential supply chain disruptions, and make informed decisions regarding supplier selection, negotiation, and relationship management.

4) Cost Reduction

Receive assistance in cost reduction efforts by optimizing sourcing strategies and identifying opportunities for cost savings. By analyzing market trends, commodity prices, and supplier performance, automotive brands can negotiate better pricing terms, consolidate suppliers, and optimize their procurement processes to become more cost-efficient.

5) Mitigation of Supply Chain Risks

Automotive brands are empowered to identify and mitigate potential risks in the supply chain. By analyzing various risk factors such as supplier performance, market dynamics, and geopolitical events, brands can proactively address supply chain disruptions, minimize lead time variability, and ensure business continuity.

6) Streamlined Procurement Processes

PPO enables the automation and streamlining of procurement processes. By leveraging technologies like artificial intelligence and machine learning, automotive brands can automate routine procurement tasks, improve data accuracy, and optimize the efficiency of their procurement operations.

7) Enhanced Decision-Making

Receive valuable insights and data-driven recommendations to support strategic decision-making. By having access to accurate forecasts, real-time market data, and performance analytics, automotive brands can make informed decisions related to sourcing strategies, supplier relationships, and procurement investments.

Overall, Predictive Procurement Orchestration empowers automotive brands to make more accurate forecasts, reduce costs, mitigate risks, and enhance overall operational efficiency. Data-driven insights help automotive brands drive better decision-making and gain a competitive advantage in the market.

How Predictive Procurement Orchestration Helped Holman Enterprises

Arkestro is helping automotive manufacturers improve efficiency, predictability, and cost efficiency with our Predictive Procurement Orchestration (PPO) platform, which embeds preferred outcomes and instant feedback in any process.

With the help of Arkestro, international automotive company Holman Enterprises was able to overcome supply chain challenges and achieve cost savings, transparency, and control in procurement. Ultimately, they saved 7% on $500,000+ spend, reduced suppliers, and improved business outcomes.

Today, Holman’s procurement team is highly efficient and effective, using Arkestro to award projects to lower-cost and more qualified suppliers, all while benefiting their customers downstream.

engine and mechanic

Talk to an Arkestro Expert Today

Inflation, global conflicts, and unstable supply chains aren’t going away any time soon — and automotive procurement teams must rely on the latest technology to improve efficiency, predictability, and cost efficiency.

If you’re ready to see how PPO can revolutionize your procurement processes, talk to an Arkestro expert today. We’ll let you see Arkestro in action and help you amplify the impact of procurement for your automotive brand.