Automotive market change and downturn – Understanding the impact on your business

Global demand in the automotive industry is slowing down due to several reasons. OEMs and suppliers are all affected, however OEMs generally have a better view on the market. This helps them to plan better and deal with the lower demand ahead. Suppliers frequently rely on received EDI customer call-offs with visibility limited to a few months. Descending the supply chain from Tier-1 to Tier-X suppliers, the demand forecast accuracy deteriorates with each level as every supplier brings in its own assumptions and buffers. How to step out of the vicious circle and get better market insights for increased planning accuracy?

First, it is important to have a sound understanding of the market. This includes the link between supplied components and final products, such as the OEM vehicle, platform, engine, etc. It is not enough for suppliers to understand their direct customers. For multiple reasons, e.g. product needs and requirements, it is also required to understand at least the customers of their customers. Suppliers should consider complementing their market knowledge with independent market forecast data, which can be purchased from external sources.

In a next step, for running business suppliers might compare their own expected market volume development, with external sources and the customer call-offs. Identified deviations are the first step towards taking actions, e.g. adjusting the planning or re-negotiating contractual terms with customers, etc. Such continuous forecasting, analysis and volume planning provide a sound basis for short-/ mid-term business steering.

Nevertheless, suppliers also must accurately plan their future business. It is important not only to look at the total turnover intake of a new business opportunity but also at the timing of the expected revenues. Extending opportunity management to become a strategic planning tool supports increased planning accuracy and ensures that the right business is acquired today to meet the revenue targets of tomorrow. Future business risks can be considerably reduced by continuously monitoring new opportunities and their expected revenues for the coming years.

To sum it up, accurate planning separates the better from the best. Suppliers should understand the customers of their customers and the products / systems their components are becoming part of. Market forecast data can deliver helpful insights and act as an independent guide. For current running business, comparison of different volume scenarios, such as contract vs. call-offs vs. market, support to derive corresponding actions. For upcoming new opportunities, it is important to look as far as possible into the future and consider the timing of the expected revenues. Accomplishing all of these things can finally help to improve business planning accuracy and to be successful in the future. A powerful CRM solution can support to easily manage and analyze the required data to achieve superior planning performance without cumbersome Excel worksheet data crunching.

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