Supply Chain Cost Management in the Automotive Components Industry: A Case Study of Fuyao Glass

Abstract

The current electrification and smart transformation of the automotive industry has had a long-term negative effect on procurement prices, as well as increasing upstream cost volatility, which has created a profit squeeze that is forcing component suppliers to fundamentally rethink their cost management architectures. In the case of manufacturers of automotive parts, the erosion of margins has been compounded by the combination of escalating costs of raw materials, escalating logistics costs, and more complex multi-level supply chains. As a result, the ability to control the supply chain costs has become a key factor in determining the continuity of operations and competitive advantage. Nonetheless, existing industrial practices remain beset with poor supply chain coordination, ineffective inventory allocation, crude methods of allocating costs, and a lack of resilience to external shocks- making traditional managerial strategies ill-suited to meet the demands of rapid technological and structural change. This study examines Fuyao Glass, a leading supplier of automotive glazing, using a case study approach triangulated with a systematic literature review to identify current gaps in its supply chain cost regime and develop specific remedial measures. The resulting optimization framework will provide Fuyao with practical avenues of cost mitigation and provide the wider automotive components industry with an example to follow in enhancing supply chain strength in the face of mounting global competition.