In the United States alone, auto parts manufacturers account for a combined $250 billion in annual revenue. These companies manufacture a wide range of automobile parts and components for engines, transmissions, power trains, electronics, braking systems, steering and more. While consolidation of car companies has resulted in a smaller number of large suppliers, there’s still a sizeable market for small and mid-sized manufacturers. Globalization, self-driving cars, expansion into new markets, and an increased demand for auto parts due to higher numbers of older vehicles still in operation – the average car on the road today is more than 11 years old, which means more need for repairs and parts – are all leading to growth in this industry.
Need for cost reduction
A prevalent issue facing the mid-size automotive industry right now is the need for cost reduction. Manufacturers are seeing significant downward pressure on pricing from their automaker customers, forcing businesses to get creative in the search for ways to reduce costs and increase productivity and efficiency.
Reducing costs through technology
Many are using technology to improve efficiency, reduce manual labor, and reduce waste. Some examples include:
- Modern ERP systems that connect all aspects of the business from receiving of raw materials through inventory to purchasing and finance.
- CAD integration with business systems such as ERP
- 3D printing, which can reduce costs while maintaining or even increasing component complexity
- Advanced analytics software, paired with machine and ERP data, for understanding and predicting production failures, reducing downtime, and looking at demand over time
Reducing costs through supplier contracts
Negotiating terms and prices with major suppliers is another common approach to reducing costs for automotive parts manufacturers. Many are turning to progressive decrease contracts, in which suppliers agree to lower costs as volume increases. Others are increasing supplier efficiency with innovations like workplace automation and vendor portals, which integrate into the business’ ERP systems.
Reducing costs by streamlining logistics
It’s important for mid-sized auto parts makers to minimize their inventories both of raw materials and of finished products. They can do this by making full use of their computer systems, such as ERP, for functions such as advanced planning and scheduling, mobile inventory management, and supply chain integration through vendor and customer portals.
Finding new markets
There are significant similarities between the skills and equipment needed for auto parts manufacturing – specifically the processes of plastic injection molding -- and the skills and equipment needed for certain consumer products and the aircraft industry. Customer diversification can provide long-term stability for small and mid-size auto parts manufacturers.
Source: Dun & Bradstreet’s First Research