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