Automotive & Transportation

Flexible strategy to adapt to evolving market trends and strengthen supplier collaboration

OEMs need to move away from the notion that, despite changes in the components and systems they use, their operational model can remain unchanged.

Procurement will require transformation across all areas, including management structures, risk management, supplier relationship management, contracting models, and more.

To align with new market dynamics and foster a stronger partnership with suppliers, the automotive industry must adopt a new strategic procurement model. At its core is the idea that companies must embrace a more adaptable approach to procurement, one that doesn’t rely solely on traditional market power for success. To guide this shift as companies transition to EV procurement and help them determine the best way to manage varying procurement needs and suppliers, KGM Strategy has developed a Strategic Procurement Model. This model focuses on 6 categories: xEV, Components, ADAS/AV, Software & Applications, Extinction, Service & After Sales. A strategy matrix with six dimensions (sets of tools and actions) can be used to optimize procurement strategies for each of these categories.

Enhance Supply Chain Resilience and Risk Management to meet regulatory standards

After years of tightening emission regulations, the European Union has decided to eliminate combustion engines for passenger cars by 2035. For OEMs and suppliers, this means that decarbonization and the transition to carbon-neutral powertrains must accelerate beyond initial plans. Suppliers focusing on traditional powertrains need to speed up their transition into new business areas.

The EU’s requirements extend beyond emission-free propulsion: in the future, vehicles should not only operate without CO2 emissions but also be produced without emissions. The automotive sector is accustomed to rapid innovation cycles, high cost pressures, and complex global supply chain integration.

The increased value-add from suppliers in next-generation vehicles (for most manufacturers), coupled with varying levels of integration, will have profound effects on the industry: Supply Chain resilience will become even more critical. Moreover, new regulations such as the Carbon Border Adjustment Mechanism (CBAM) challenge existing sourcing strategies.

Cost-effective and sustainable procurement of scarce raw materials

The shift to e-mobility has significantly increased the challenges of sourcing raw materials. Due to the conditions under which they are extracted and produced, materials for electric vehicles, such as nickel, cobalt, and rare earth elements, have been difficult to source responsibly. However, there is growing pressure from consumers for businesses to maintain social and environmental standards throughout their supply chains.

Moreover, many of these materials are subject to significant price volatility. Solutions for cost-effective procurement of raw materials can be found here.

The combination of sustainability and cost-effectiveness presents a unique challenge for sourcing critical raw materials. Our experts are here to help you navigate this challenge.

The semiconductor shortage has demonstrated, with unprecedented clarity, that automotive manufacturers and suppliers are not only competing for resources within the automotive sector but also face cross-industry competition. This is especially true in the consumer electronics sector, where a few dominant players with rapid innovation cycles control the market. Ensuring consistent supply security through accurate forecasting and stable partnerships is crucial in this environment.