What can automotive suppliers gain with price management automation?

The origin story

The automotive industry is dynamic and competitive, with vehicle manufacturers (OEMs) and suppliers working closely to innovate and bring cutting-edge technology to market. Subsystem suppliers like you, who provide critical components like drivetrain, suspension, and braking systems, have historically enjoyed strong profit margins. 

However, the landscape has shifted dramatically in recent years. The COVID-19 pandemic brought about massive supply chain disruptions, a global chip shortage, soaring raw material and energy prices, higher interest rates and record inflation. While OEMs managed to navigate these challenges by focusing on high-margin models and raising prices, suppliers had fewer strategic options. 

Are margins your Achilles heel?

The growing uncertainty surrounding the pace of electric vehicle (EV) adoption puts additional pressure on your organization. OEMs face the dual challenge of producing gas-powered vehicles and EVs, leading them to implement further cost-cutting measures and increase pricing pressure on suppliers. While you’re accustomed to such pressures, the current economic environment could push margins even lower, threatening the financial stability necessary to fund R&D and bring innovations to market. One way to regain your super strength and fight the pricing pressure you face is to upgrade and automate price management processes.

Up, up and away!

If you’re like many suppliers, you still rely on manual processes and spreadsheets to track costs, optimize pricing and generate quotes. These outdated methods are not only time-consuming but also prone to errors, which can significantly impact margins over time. For example, a single incorrect entry in a spreadsheet can result in improperly priced products and lower-than-expected margins, ultimately hurting cash flow.

I’m confident that automating pricing processes can address these challenges by providing a more efficient, accurate and reliable approach to managing costs and setting prices. 

6 reasons price management automation will save the day:

1. Improved Accuracy and Consistency: Manual processes are susceptible to human error, leading to inconsistencies and inaccuracies in pricing. By automating these processes, you can ensure that all calculations are accurate and consistent, reducing the risk of costly mistakes.

 2. Faster Response Times: In today’s fast-paced market, responding quickly to changes in commodity prices, customer demands and market conditions is crucial. Automation enables suppliers like you to adjust prices in real-time, ensuring you remain competitive and responsive to market dynamics.

 3. Enhanced Data Management: Capture and organize cost data in a structured way, making it easier to analyze and optimize pricing strategies. It also provides a historical database that can be used to refine future pricing decisions.

 4. Integration with ERP Systems: Revenue management solutions that integrate with your existing ERP system can streamline pricing, from cost calculation to price optimization, eliminating the need for disparate systems and reducing the risk of errors.

 5. Margin Optimization: Automated price management systems can analyze cost data, market trends and customer behavior to determine the optimal price for each product, helping you achieve the higher EBIT margins enjoyed before 2019.

 6. Reduced Risk of Revenue Leakage: Avoid revenue leakage by ensuring that all incentives and discounts are accurately applied and tracked, which reduces the likelihood of underpricing and ensures that margins are protected.

Be a pricing superhero

As the automotive industry continues to evolve, those suppliers who embrace automation and leverage data-driven pricing strategies will be better positioned to weather the challenges ahead and capitalize on new opportunities. Now is the time to move away from outdated, manual pricing methods and invest in automation to secure a more profitable future.