Acquiring components in the electronics industry is a complex task for the procurement and sourcing teams. They must stay updated with industry changes, technology advancements, current trends, and new regulations in the automotive sector. Also, managing costs while maintaining the quality of electronic parts is a serious challenge.
Today, we have Klaus Wandler, the VP of Strategic Procurement at APAGCoSyst, who talks to us about the challenges and disruptions in the supply chain, and other key changes affecting the procurement and sourcing departments in the automotive industry. Let us explore what lies ahead and how to overcome procurement challenges in the electronics manufacturing industry.
Thank you for your time, Klaus. Shall we start with you telling us a little bit about yourself?
My name is Klaus Wandler, and I head the strategic procurement function for APAGCoSyst. I have just completed my 40th year in the industry and I have worked mostly with automotive companies. One of the most impactful experiences in my career was my time with Faurecia, now called Forvia, where I worked for seven years. This was a great opportunity for me as I was exposed to many different functions of business, including logistics, and supply chain. This experience helped me understand the lifecycle of materials in each of its stages until it reaches the customer.
Disruptions in Supply Chain and Decisive Supplier Relations
Given your experience and background, what are some of your observations about the key challenges that automotive procurement teams face today?
In a strategic procurement function, especially in a larger organization, we will have to understand that we are dealing with thousands of raw materials or parts. At APAGCoSyst, we mainly deal with the Electronics Manufacturing Services (EMS) business for various customers across the globe. This means that there are plentiful Bill of Materials (BOM) to handle for a procurement team. It is challenging to keep things under control as the portfolio of parts that we deal with is huge.
The other main challenge will be that the electronics market today is largely controlled by manufacturers, which means it is a sales market, and not a procurement market today. This means that we have limited capacities across the globe. Factors like earthquakes or political tensions across countries and sea routes will have a huge impact and disrupt the supply chain. These times call for out-of-the-box solutions to keep the ship afloat. While these unforeseen situations are a challenging phase for a procurement team, it gives us a sense of motivation to solve them. Dealing with manufacturers or distribution partners on logistics, and negotiating pricing from across the globe is what makes the job interesting.
What are your thoughts on effectively managing supplier collaboration and ensuring quality? If you can give us an example, please.
At APAG, we have a threefold relationship between manufacturers, distribution partners, and tier 2 or tier 3 companies. The decision that we have taken to carry forward our business has been to expand from being an EMS partner to the industry to become a design house which allows us to deal more directly with the manufacturers, and we have been successfully on that path for the last five years. We have partnered with electronic components manufacturers directly and with their help developed key automotive components that we see on the road today.
Another important aspect we have been implementing is to manage distribution partners only for the supply chain management. The challenge here is to control the costs and what has worked out for us so far is to negotiate the price levels with the manufacturers and work with distribution partners only for the logistics function. Although this is the best fit, for a middle-sized company like APAG, it is not a cakewalk, mainly because of the position of the distribution partner. The keyword today is ‘volumes.’ Our strategy today is to knock on newer possibilities to stay profitable.
The Economics of Automotive Supply Chain
How has the current economic landscape shaped the supply chain strategies in the automotive industry?
The economics and supply chain strategies in the automotive industry can be spoken about in two milestones – one before COVID and one after the pandemic. As a milestone, especially in Germany, the pandemic caused about 70 per cent reduction in schedules and downsized the production in the automotive industry. This phenomenon also boosted the electronics manufacturers turning their attention to other industries, other than automotive industries. Mainstream automotive suppliers are now looking at implementing newer strategies to cater to other industries such as the IT industries to be profitable. The automotive industry consumes only about 30 per cent of electronics. These factors play a significant role in supply chain strategies and the economics of the automotive industry as well as the electronics industry.
In what ways do currency fluctuations and trade policies impact sourcing and procurement in the automotive industry?
The American dollar is still the most influential currency in the electronics industry today and because of this, the impact of currency fluctuation is still smaller. The ever-changing trade policies between the EU and Asia or Asia and America have an influence on the market, no doubt, but as an electronics manufacturer, we do not have a lot of say in this. Like any other electronics manufacturer, APAG also must abide by these rules. Over the years, we have implemented strategies that are beneficial for both our partners and us as a company.
Innovations and Optimized Solutions
With the advent of Procurement 4.0, how do you see technology playing a crucial role in optimizing the sourcing and procurement process?
The new age of procurement strategies is already in play at APAG. Being an early adopter to integrate tools with IOT, AI capabilities give you the ‘first mover’ advantage. Plus, these tools provide a 360-degree overview that can have a long-lasting impact on the supply chain management function. Certainly, we now can do a lot more with the available data from these tools. Also, another important thing is that implementing the Procurement 4.0 strategies is an investment to the company. As a small player in the big market, we need to act faster and find our niche in the market.
How is the rise of EVs influencing the demand for electronic components in vehicles?
An EV has a lot more electronic components than a vehicle powered by an internal combustion engine. While having said that, the EV is still an automotive vehicle. As an electronics manufacturer, of course, EV is a great opportunity to capitalize on, but electronics components are used in differently in everyday life. We need to take advantage of the advancements in all industries to stay beneficial.
Today, EVs are prominent on the roads, tomorrow there will be autonomous cars. So as an electronics manufacturer and a design house providing EMS solutions, we need to expand our horizons and look for newer opportunities. Autonomous cars will have even more electronics than today’s EVs. As a company, having the ability to foresee the next ‘big thing’ and being prepared in that direction makes companies great. At APAG, we are looking to capitalize on our expertise in providing EMS and lighting solutions.
We are constantly thinking outside the box, for example why only concentrate on electronic passenger cars, why not trucks, off-road vehicles, and industrial-use autonomous vehicles? These are the key questions that a company, collectively need to address to stay beneficial in the long run. We have been doing that in the last decade, and we are looking forward to working together with our clients and partners to solve bigger challenges together.
APAGCoSyst is a leading supplier of electronics for the automotive, medical, and industrial sectors. Our state-of-the-art, high-quality production is flexible and responsive with products ranging from simple assembled PCBs to packaged and finished components. We specialize in designing and manufacturing electronic control units (ECUs), lighting, and electronic manufacturing services (EMS), as well as providing top-notch industrial automation services. We are driven to deliver excellence as a global partner for our customers. Join us and explore the world of electronic control units. To learn more about our services, please visit our website at www.apagcosyst.com. If you are interested in our services, please feel free to contact us via email at info@apagcosyst.com.