Key Elements for Automotive Suppliers to Transform their Business Model

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Automotive industry is in the midst of futuristic change to conceptualize the way it will shape up. The Original Equipment Manufacturers (OEMs) and auto suppliers have to revamp their business model to match up the pace of the dynamic changes happening in the entire business environment. In order to get the right amount of exposure and results, these are certain vital elements required to transform the business model of Automotive suppliers.

Strategy and Portfolio
Automotive Suppliers need to redefine their end-goal, key strategies, and portfolio to get the efficacious implementation of the business model transformation process. Enthusiastic voices from automotive suppliers are indicating towards the thorough evolution of innovative digital ideas and opportunities. Experts say that it will help to optimize the bottom-line profitability by prioritizing them. The transformation roadmap will define the way things shape up in the unpredictable future environment.

Product and Technology
For years, Automotive suppliers were focused primarily on the procurement of plants, obtaining critical scale, and performance enhancement. Deployment of some ERP tool used to be the major area where they worked, but it will be redefined with the new portfolio and strategy. The paradigm shift from production to innovation will give the significant improvements.

vehicle parts identification platform
This approach goes hand-in-hand after the reincarnation of the portfolio. Digital platform is the key element during the transformation which makes software and technologies as the key differentiators. An interesting development during this transformation is that the value chain will change the role of competitors. Due to the added value, your competitors could become your development partners or customers.

Operating Cost Base
The profitability has the inverse relationship with the operating cost base. Automotive suppliers need to keep in mind that their operating cost base should be minimized while acquiring the digital mastery of automotive. This move will open up more space to save cost for future research and development. Key decision makers need to overcome this problem to divert focus on the future development.

Capital/ Financing
Capital reserve is essential for the rapid deployment of new and upcoming technology. In order to get maximum financial gain with the transformation, the revision of capital structure is needed. The key strategies and investors’ interest should align for the same goal.

Competencies and Capabilities
The core competencies and capabilities are the reflections of your future ROI. It is vital to identify that which areas of capabilities need to improve with the future initiative. This could be a complex challenge to overcome the gaps between current and needed competencies. The external options like Mergers and acquisitions, partnerships, technology & talent sharing are supportive to bridge these gaps. They may provide cost-effectiveness within the designated time limit.

Organization and Governance
During the transformation phase, there is an opportunity and need for redesigning the organizational structure. The revamping of your ‘Think-Tank’ would help to achieve the new goals with updated strategies. Experts recommend to synchronize the two different aspects of leadership. The traditional expert team and advanced newbies should put in the right frame to a cultural harmony of organization.

It is likely to get more from partnerships rather focusing on in-house capabilities and funding. Traditional suppliers used to be more conservative for partnership, but they should be more open. This methodology works to close the competencies gaps and divert focus on innovation. Collectively, players who have expertise in different verticals can work closely. The critical part is the choice of right partner and time, make sure the end-goals are aligned with your partners.

Cultural Mindsets
Automotive suppliers need to systematically evaluate their cultural mindsets with the innovative digital opportunities. Overhauling of the right level of risk and innovation to compete with the new competitors will create and manage a supplier’s future business areas.

In order to optimize the bottom-line profitability, automotive suppliers should work closely with technology and future users. Here is a big difference between traditional and new-age competitors that traditional competitors don’t attract new talents. This is a cultural barrier which can be overcome with company leadership with the open cultural mindset. Automotive suppliers should adopt this improvement to achieve the future success road-map.

Experts’ Point of View
News of disruption in the automotive ecosystem has been the talk of the town among market leaders. The idea of right partnership is vital here, digital partners for the legacy transformation and future strategies will be a crucial entity. The transformation is inevitable, so suppliers and OEMs should accept the change. AutoDAP is one of the futuristic partners for suppliers and OEMs to bridge the competencies gaps. They have a unique vehicle parts identification solution which provides 90% parts accuracy and 95% vehicular identification accuracy. It helps in the cataloging system of part suppliers and the ecosystem. Suppliers can get their spare parts management system to be competitive in the environment.

Anamaya Dwivedi

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