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Reduction in material costs among automotive suppliers

Reduction in material costs among automotive suppliers

With the increasing volatility in the sales and procurement buying markets, the measures previously taken by automotive suppliers to reduce their material costs are no longer quite as effective. In an extensive article for the magazine "Automobilproduktion" ("Automotive production"), TMG purchasing expert Spencer ten Brink explains what companies can do to achieve lasting success in this ever-more-important management field.

Initiatives for reducing material costs should have top billing on automotive suppliers' management agendas this year, since the potential for significant savings is considerable. However, lasting success in this field requires a credible strategic negotiating position to be developed, as well as continuity in the operational implementation of cost reduction activities.

The dynamics of the change are also increasing among automotive suppliers. The shorter the cycles and the higher their peaks, the more purchasing must also be extended. "Purchasing requires creativity and must not get worn out by 'pushing' prices", warns Spencer ten Brink, expert on increasing efficiency in the supply chain at the management consultancy TMG Consultants GmbH in Stuttgart.

Purchasing is increasingly overextended

"With increasing volatility in both supply and demand markets, purchasing is increasingly being called upon to break new ground. The program of measures traditionally implemented to reduce the burden of material costs simply no longer fits with the cyclical developments that are, in many cases, accompanied by high uncertainty, to which we are all exposed today."

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