Driving a hard bargain

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For car manufacturers the World is a tough place. The bottom line is, demand no longer outstrips supply. And that puts the customer firmly in the driving seat. In recent years, over supply has been accompanied by marked-down prices and special zero per cent finance packages, which is fine when interest rates are low. But now, the prospect of a more expensive money supply and an end to block exemption, is set to put even greater pressure on car makers to change their ways.

Further consolidation and continued costcutting is widely expected, but in a global industry of some 300 automotive and autorelated companies, with a combined market capitalisation of about €750 bn, restructuring will be a slow process.

What’s needed is a fundamental shift in focus, away from cost centric planning to a concentration on profit per car. This requires a supply chain that is more closely aligned to providing what the customer actually wants rather than what is necessarily the lowest cost build for the manufacturing operation. To a great extent the big players know what needs to be done. Cars should be built by more flexible manufacturing facilities, capable of responding to changing patterns of demand and working on a build to demand basis, rather than the traditional build to stock model, which naturally results in a vast waste of parked inventory sitting on the dockside.

Recent advances in information technology enable the swift exchange of data, for both planning new models and creating closer links with suppliers. The challenge now is to use this technology to facilitate this required changed in strategy.

It would seem sensible to assume that those manufacturers that are able to undertake this change in strategy the fastest will be the winners. Unfortunately, the global giants are hardly the most nimble of organisations and turning such juggernauts, with their heavy investment in plant and infrastructure, could prove to be too difficult a task in the short term. Smaller, more agile, enterprises may be the front-runners in this race to build cars that are more customer centric and, essentially, more profitable to make. Importantly, that still places the customer firmly in the driving seat, where he belongs.

Nick Allen, Editor

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