Procurement and supplier management. Not really topics to set most people’s hearts racing, but subjects that are now becoming key skills requirements for leaders in the automotive industry.

The capability of digital technology to connect the customer directly with the brand has transformed and disrupted long-established business relationships in new car sales, remarketing and through the extended supply chain. This connectivity relies on suppliers enabling the connection and often delivering all or part of the service. 

However, many businesses across multiple sectors are making the mistake of choosing suppliers based primarily on cost rather than the defined needs and expectations of consumers. I say that not just as a businesswoman working with clients and job candidates in all areas of the automotive supply chain but as a customer who, like everyone else, experiences the impact of poor procurement and supplier management decisions. 

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Who hasn’t felt frustrated and exasperated, for example, by the experience of making a customer service enquiry and being unable to speak to a human being?

The perfect storm of high inflation and a chronic skills shortage across the industry means more and more organisations are looking to outsource elements of their business to save as much money as they can in the supply chain, with the consequent risk of outsourcing their brand and reputation.

Success requires leaders with proven skill in identifying and managing suppliers to deliver the level of service, the quality, the long-standing expertise and the value-add to the organisation, remembering the needs of the customer at the end of the chain. 

If Covid-19 taught us one thing, it is that good supplier relationships matter because when a crisis hits, they will be tested. The automotive industry was found wanting and was unable to obtain microchips to restart production.

But have we learned lessons, or are we just back to ‘business as usual’, where the bigger dogs in the supply chain bark at the smaller ones to drive down costs? 

My business conversations tell me that, with some notable exceptions, it remains all about the money and that will come back to bite businesses as the supply of new vehicles continues its steady growth back to pre-pandemic levels and pressure on margins grows. 

The evolution of direct-to-consumer and online sales through the new retail agency model underlines the importance of having the right procurement strategy, with clear expectations and standards, and then managing suppliers to deliver. For example, it means manufacturers now need to work with new suppliers to deliver services in key areas such as technology, consumer marketing and finance that they have never previously managed.