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Automotive Purchasing in the Age of Exotic Materials
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Purchasing components that use high-cost materials like palladium is a risky task. 

Right now, palladium and platinum prices are low due to the depressed demand for automobiles, favorable conditions in the world's supply sources and the increase in palladium recycling. Gold prices, on the other hand, are climbing.

New automotive technologies such as hybrid drives, batteries and electronics require new materials, such as lanthanum, praseodymium, neodymium, cerium and terbium. Copper, cobalt, tin, lithium and niobium are also increasingly used.

To purchase components that contain such materials, companies may negotiate contracts with monthly price adjustments based on the weight and type of the material and its current market value. In the background, the company's financial division may have a hedging strategy for price fluctuation in the market. Purchasing managers should be involved in the design phase of new products and components. In the long term, redesigning components to optimize the use of high-cost materials reduces overall cost.

Sven Marlinghaus, a partner and managing director at BrainNet, an international supply chain management consultancy, suggests:

  1. Study the raw materials markets and possible developments over the next few years.

  2. Invest in supplier development and risk management of existing supplier relationships.

  3. Take advantage of modern recycling methods.

  4. Develop strategies to secure long-term control of critical resources, even by reintegrating material extraction activities, forming alliances with supplier countries or relocating production to the extraction region.

  5. Increase cooperation between purchasing and technology development, with possible organizational changes.

  6. Broaden familiarity with more raw materials markets and sourcing strategies used in other industries for rare earths and metals.

Marlinghaus explains that, as technology becomes more complex, the best automotive purchasing managers will become professional market and industry analysts.

The article you read was prepared for general information purposes by McMurry. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.