Wednesday, 21 July 2021 17:41

Sourcing in Automotive Industry Moving Toward Regional Suppliers, Says Beroe Inc.


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A crucial part of the automotive industry is the market for spare parts that also contributes to superior customer service.

According to Beroe's report, auto component buyers are planning to shift gears in their sourcing practices in the long term by engaging with either local or regional suppliers. However, there is always a need for global sourcing in the auto industry for procuring high volume–high precision products.


"Auto component buyers are diversifying from the dominant supply bases to ensure supply risk mitigation and reduce the cost per unit of auto components," said Vignesh Premkumar, a research analyst at Beroe. "Buyers from the auto industry plan to take on this strategy slowly and are therefore diverting their partial sourcing activities away from the dominant bases. Buyers have started looking for local sourcing opportunities."


There are several reasons why the automotive industry is looking to shift toward more regional suppliers in supply chain diversification. In the past, OEM buyers would limit themselves to a few auto component suppliers. However, this is now changing due of the growing demand and the need to mitigate supply chain risks that have emerged due to the ongoing pandemic.


Most major auto OEMs are currently strategizing for implementing supplier diversification; this will enable them to improve their sourcing flexibility when the demand levels are high. This also helps buyers bring their products to market with speed.


The U.S. and China trade war in the recent past has affected the automotive industry immensely. U.S. buyers had to look for alternate sources for their raw materials because of the high taxes imposed on them. This has made the South-East Asian countries a more appealing option.


There are several OEMs from Germany looking for alternative sourcing options from Eastern Europe. Countries such as Poland, Czech Republic, Hungary and Bulgaria have lower costs due to supply base concentration.


Despite India's political tensions with China, it still depends on it for sourcing batteries, electronic parts, rare earth magnets and more. For mechanical components such as...

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