In a bid to drive cost efficiencies and operational synergies, Hyundai and General Motors have entered into a collaborative agreement focusing on supply chains and production areas. The partnership aims to combine sourcing efforts to secure and reduce the cost of raw materials, such as steel and materials needed for EV batteries.
The Power of Collaborative Purchasing Alliances
Collaborative purchasing alliances, though less common in the automotive industry, are gaining traction. These partnerships, typically driven by the need to combine research and development resources, can lower costs and secure stronger suppliers. According consulting firm Kearney, these alliances are most successful when they focus on combining resources to advance specific technologies or bring programs to market.
The Impact and Challenges of Purchasing Partnerships
The impact of a purchasing partnership largely depends on the size of the Original Equipment Manufacturer (OEM). Larger companies already have significant buying power, and the benefits of increased procurement reach often do not offset the cost of establishing the partnership. However, smaller start-up OEMs, such as Rivian or Lucid, could achieve significant savings from a collaboration.
Despite the potential benefits, combined sourcing efforts come with significant challenges. The primary challenge being company culture, as separate processes and operations can make partnerships difficult to execute. However, having a clear objective of the partnership goal can help mitigate issues.
While partnerships can pose challenges, they also present opportunities for change and disruption within companies. With a clear objective, these alliances can positively impact companies’ procurement operations and bottom lines.
