The purchase cost of a complete vehicle accounts for 60%-80% of sales. In order to reduce the cost of the entire vehicle, reducing the cost of procurement bears the brunt. In general, domestic large-scale automobile manufacturers have fixed dozens to hundreds of component suppliers. Between parts and vehicle companies, vehicle companies often have the absolute right to speak. When the vehicle price falls, most vehicle manufacturers will require their component suppliers to reduce their prices. This will reduce the loss of profits suffered by vehicle manufacturers during the price reduction process. Although this method is effective in a short period of time, it is not a long-term strategy. It needs to seek solutions from the most basic place.

There is competition to reduce prices

As China's auto parts industry still presents a situation of “scattered, chaotic, and poor”, vehicle companies often face many small-scale supporting enterprises when they purchase. When we analyze each component corresponding to the supporting manufacturers, two phenomena are worth our thinking.

The first is exclusive supply, no competition. Vehicle manufacturers only choose one supporting company to provide certain components. Due to the lack of competitors, the price of parts and components is often high, which directly affects the cost control of vehicle manufacturers. There are often two reasons for this situation: such parts and components are designed for new models, and there are few companies with production capacity; some “relationships” exist between vehicle companies and supporting enterprises, leading to the monopoly of procurement. ". If the former is the case, the exclusive supply is still understandable; if the latter is the case, it will require the enterprise to seriously introspect.

The second is more than supply, rivers and lakes melee. In the procurement of certain parts and components, the entire vehicle company has four or five supporting suppliers, and some even more. Not only that, among these suppliers, the affiliated companies and units of the Group also occupy a large part. Compared with other supporting companies, the high cost is the biggest problem for these companies. Even if a company is tempted to lower its purchase price and is limited by the scale of purchases, coupled with the various relationships that exist in the middle, the “price reduction” can only be intentional.

In response to this phenomenon, vehicle companies need to establish an “oligarchic competition” mechanism, which means that 2-3 supporting companies should be selected for the procurement of a component. On the one hand, the existence of several companies is conducive to improving vehicle companies' greater initiative in purchasing prices; on the other hand, centralized procurement of the same type of parts and components in 2-3 companies can not only reduce procurement logistics costs, but also help The whole vehicle company uses bulk purchases to lower prices.

In response to the two major problems existing in parts and components companies, vehicle manufacturers can optimize suppliers through the following four stages. At this stage, vehicle companies should solve the multiple supply problems of the same component as soon as possible.

The first stage: On the basis of guaranteeing the normal supply of all parts, we will first phase out more than three of the supporting companies. During this period, it is necessary for vehicle manufacturers to optimize the system of supporting plants with a relatively low purchase amount in the same type of supporting plants and improve the efficiency of supporting management. Negotiations on bargaining with suppliers with lower annual purchases, if the price reductions are satisfactory, can be retained; if small suppliers are unwilling to lower prices or price cuts are too small, they can be based on the specificity of the products provided, and the alternative technologies are feasible. The integration of factors such as sex, similarity of processing technology and similarity of raw materials, and transfer costs, etc., are intensively produced or commissioned by large suppliers; if some small suppliers have low prices, excellent quality and sufficient production capacity, some of them can be integrated by others. Small vendors.

The second stage is to look for replacements for exclusive supply, phase out exclusive suppliers for exclusive supply, further reduce the number of supporting manufacturers, and increase the purchase volume of each supporting manufacturer.

The third stage: Focus on supporting and selecting supporting manufacturers with strength and scale to prepare for long-term strategic partners.

The fourth stage: preliminary establishment of a reasonable supporting system.

In this way, the entire vehicle company will gradually form a good strategic partnership with a certain number of parts and components companies, thereby effectively supporting the cost control of the entire vehicle company in the supporting procurement process.

Multiple measures to reduce procurement costs

Regardless of the fact that the overall level of China's parts and components enterprises is not high, vehicle companies can only be considered as a "primary stage" in setting purchase prices. Although most auto manufacturers regularly negotiate with supporting manufacturers to reduce the purchase price of parts and components, how much can be reduced depends on the competition of supporting companies and the negotiating ability of procurement personnel. This kind of subjective approach can hardly guarantee a reasonable decline in the purchase price. In particular, when the purchase amount is large, a decrease of one percentage point may bring greater losses to the vehicle manufacturer.

According to the empirical curve theory, the more a factory produces a certain product, the more the producer can understand how to produce the product, the more experience he gets from production; in later production, the factory can The production cost of the product is purposely reduced; when the cumulative production of the plant is doubled, the production cost can be reduced by a certain percentage. Therefore, a complete vehicle company can establish a specific accessory experience function for parts with a large purchase amount, and then deduces the price reduction rate of the part in the future. With a clear price reduction expectation, vehicle companies will not only be more comfortable in negotiations, but also have clearer standards when selecting supporting companies.

Parts procurement is the key to reduce the cost of the entire vehicle, and large-scale procurement is the key to reduce the cost of procurement. When an enterprise's purchase of a certain component reaches a certain base, the enterprise should use a volume discount program—determining different discount rates for different annual purchases. The larger the annual purchase, the greater the discount rate. The formulation of specific plans requires companies to determine according to their actual conditions and the ability to negotiate with major suppliers.

Not only that, vehicle companies can also use cash discount programs to reduce procurement costs. That is to say, the entire vehicle company may pay a certain price discount on the agreed date of payment or advance payment. This approach helps to accelerate the cash flow of supporting companies. The size of the discount is generally determined based on factors such as interest and risk costs during payment. Of course, when designing cash discounts, vehicle companies must consider both the company’s capital costs and how many supporting companies are willing to pay a discount for early payment.

Solved the problem of two aspects of supporting manufacturers and supporting pricing, procurement costs naturally have a larger price reduction space. However, blindly lowering the purchase price of parts and components is not a way for companies to survive. After all, “cheap” is preceded by “good things”. It is the long-term strategy for a complete vehicle company to gradually establish a strategic partnership with major supporting companies. (The author is an analyst at Beijing Xinhuaxin Management Consulting Co., Ltd. Automotive Consulting Center)


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