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Sourcing Analytics Combined with Relationship Management is Key for Automotive Suppliers

I spent some time visiting this week with Sensata in Aguascaliente Mexico.  Sensata is a major manufacturer of automotive sensors, with major customers such as Continental AG, BMW, Bosch, Nissan, Caterpillar and others.  At the time, Nissan had just opened a second manufacturing facility, which hired over 12,000 people.  This was having a major impact on Sensata, and also suggests the increasing growth in the Mexico industrial market for manufacturing facilities.  Unemployment rates are less than 2%, so talent management is important for companies seeing the growth of industry in Mexico.

Sensata has a stated intention of continuing to be the low cost manufacturer of high quality automotive sensors.  They build sensors for temperature controls, power drive, and other automotive applications.  Such sensors have a requirement for reliability, lost cost, and state of the art clean room process technology.  Their new technology applications in sensors are growing, and they continue to dominate many markets because of their highly engineered product capabilities.

Working in the automotive sector is not easy. One of the biggest challenges is the need to manage engineering changes. In automotive, the ability and willingness to change designs is extremely limited. Five years ago, switching a supplier of bronze or of ceramics was not difficult. Today, however, ANY change to any tier one or tier two supplier is simply not allowed. In fact, automotive OEM customers only allow design changes once a year, which means that any changes in supplier source, specification, tooling, or any other element of process or design production has to be accumulated and implemented all at one time!

This of course creates challenges for supply base optimization, as well as in negotiating improvements. Sensata finds itself in a situation of being locked into multi-year agreements with suppliers, which requires significant relationship management skills. To improve and drive performance, the category teams rely on should-cost models, supplier scorecards, strong spend analytics, and are moving towards value engineering and value analysis teams that can take cost out supplier’s process, and ensure profitability. In the world of automotive electronics, relationship management supported by strong sourcing analytics is a way of life for some time to come!