I gave this presentation to the Precision Metalforming Association. The audience consisted of Owners, CEO’s and other executives on their Automotive Parts Suppliers’ Council.
The presentation identifies what customers expect from suppliers during this time of financial instability and restructuring in the automotive industry.
At Advanced Purchasing Dynamics, Inc. we provide clients with resources and solutions that transform procurement organizations and supply bases into top performing groups.
What customers want from suppliers in a time of transition
1. In this time of transition,
what do customers want?
A presentation to:
Automotive Parts Suppliers’ Council
Precision Metalforming Association
May 6, 2009
3. Advanced Purchasing Dynamics (APD) is
a procurement solutions provider
helping companies improve profitability
through rapid deployment of advanced
purchasing practices.
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Our focus is on best purchasing practices that improve the bottom line
4. APD solutions are based upon purchasing best practices and
tailored to the client to provide significant 1st year ROI:
Excellence Assessment - Expert perspectives, best practice
benchmarks and ability to pinpoint specific opportunities for
improvement.
material cost management system (mcms) – Software as a
service designed based upon best purchasing practices.
True Cost Modeling – Knowledge and partnership based approach
for opportunity identification and cost control on direct materials.
Cost Optimization: Direct Materials, MRO, Steel and
Transportation - Identification and implementation of cost
opportunities.
Transitional Purchasing Strategies – Customized strategies and
approaches for companies and organizations in transition.
Buyer Skill Development - Training to build buyer skills in areas
with a direct link to purchasing performance; cost, commodity
leadership and negotiation.
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APD clients earned $4-5 for every $1 invested in 2007 and 2008
5. Current situation - across the industry
purchasing groups are managing:
Closures
Consolidations
Payment and delivery issues
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6. To navigate through this
transition period leaders
should monitor the
status of their:
Companies.
Customers.
Suppliers.
Competitors.
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7. Suppliers are in one of three categories.
Severe Risk Stable
At Risk
The ranks of the at risk are growing daily.
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8. What do customers want from suppliers?
Realistic understanding of what group their
companies are in based upon:
Product line P&L’s
Financials
Banking and customer relationships
React and communicate accordingly.
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9. The Stable:
Keep resources to be able to handle
take over business.
Do not over commit.
Be selective on customers. If there is an
urge to price aggressively ask: “Is this
really a customer we want”.
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Have a truck! – A well documented “takeover” process.
10. At Risk:
Keep banks, customers and lawyers informed –
no surprises.
Understand product line profitability as well as
finances.
Explore creative options for the business such as
consolidation with a competitor, cutting loose of
unprofitable product lines, plants, or divisions.
Address the underperforming products in the
product line.
1 Shear numbers will dictate that customer have continue to
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deal with many at risk suppliers.
11. Severe Risk:
Keep banks, customers and lawyers
informed– no surprises.
Understand product line profitability and
company financials.
If addressing the underperforming
product lines is not going to reduce
overall risk - -develop an exit strategy
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1 Engage experienced help.
12. Immediate actions companies should take to
mitigate supplier risk:
Prioritize using a PFMEA risk assessment model:
Difficulty to resource X cost risk X issues caused by shortage
For high risk:
Negotiate a bank build
Obtain agreements on key points should the worse come:
Tooling acknowledgement.
Waver of liens.
Right to buy specialized equipment and to use proprietary processes.
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13. The New Frontier:
Customers should focus on
understanding total acquisition cost:
Supplier cost structures/mfg cost drivers.
Total costs beyond freight and duty.
This will lead to more localized sourcing
and better relationships with suppliers.
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14. The New Frontier OE’s
OE’s - Relative power of the OE’s will
have shifted:
Between OE’s
Between OE’s and Suppliers
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15. The New Frontier – Suppliers
Strong Tier 1’s will have gotten stronger, may have
more negotiation power than OE’s.
Process oligopolies: Will the steel oligopoly model
be repeated in other high capital industries like
castings?
Part and component suppliers:
New entrants will emerge.
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Suppliers who do not possess unique
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technology should focus on lean cost structures.
16. 496 West Ann Arbor Trail, Suite 103
Plymouth MI 48170
734-927-0836
www.apurchasingd.com
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