Interior Suppliers Lead In Efficiency and Effectiveness Among Supplier Segments, According to PwC North American Automotive Supplier Supply Chain Performance Study

Majority of Suppliers Perform Better on Effectiveness than Efficiency

Jul 16, 2014, 08:00 ET from PwC US

DETROIT, July 16, 2014 /PRNewswire/ -- Interior suppliers are leading the way among automotive segments with a median revenue growth of four percent, according to PwC's North American Automotive Supplier Supply Chain study. The majority of suppliers performed better on effectiveness (revenue) than they did on efficiency (cost). Interior suppliers showed the greatest strides in effectiveness, while Body suppliers (ranked the top performer in the 2012 study) slightly retracted in performance. Exterior suppliers improved in effectiveness but regressed in efficiency.  Powertrain, chassis and electrical component supplier effectiveness declined.

"Automotive suppliers who view and manage their supply chain as a strategic asset have achieved higher financial performance as well," said Rajiv Jetli, principal, PwC US Automotive consulting practice. "We've observed a direct correlation between supply chain performance and financial performance for many automotive suppliers.  Integrating performance improvement discipline is key to gaining a competitive edge."

Interior suppliers. The segment continues its strong performance in working capital management, as evidenced by strong performance in current year and year-over-year (YoY) improvement in inventory turns, days payable outstanding (DPO), and cash-to-cash performance. That said, below-average days of sales outstanding (DSO) performance indicates an opportunity still exists to further improve cash-to-cash efficiency. At the same time, strong revenue growth and above-average gross margin improvement indicate that fundamentals are on the upswing.

Body suppliers placed second. Body segment suppliers appear to be performing very well in both supply chain effectiveness and efficiency, having scored first in three effectiveness measures and three efficiency measures. Given that body suppliers rank first in operating cash flows, DSO, YoY DSO improvements, raw material stability, inventory turns and cash-to-cash, it appears that working capital was a heavy focus from 2012 to 2013. Under performing gross profit margins, revenue growth, and COGS growth relative to revenue growth suggests that additional efficiency and effectiveness opportunities remain.

Chassis suppliers came in third. Chassis suppliers rank fourth in effectiveness and third in efficiency, with middle-of-the-road performance in all measures. Low gross margins and cost of goods sold (COGS) growth relative to revenues suggest opportunities in cost reductions and efficiency gains and/or pricing pressures from original equipment manufacturers (OEMs). Lagging performance in DSO, average DPO improvements, and inventory under performance indicates that the chassis suppliers segment requires greater focus on cash-to-cash and working capital performance.

Exterior suppliers ranked fourth. Top performance in revenue growth indicates that OEMs are placing a strong demand for innovation and differentiation on exterior suppliers. High COGS growth relative to revenues threatens to push gross margins to below average. Low raw-material stability may be evidence of the need for improved planning techniques and supplier management, while low inventory turns offset good DPO and DSO performance—resulting in only a fifth place ranking in cash-to-cash performance cycle.

Powertrain suppliers finished in fifth place. Powertrain suppliers rank fourth overall in efficiency measures and last in effectiveness. A longer cash-to-cash cycle is being driven by low inventory turns and longer than average receivables.  The segment's focus on cost control has driven it to second overall gross margin performance, while top performance in COGS growth and revenue growth indicates a continuing focus on controlling COGS. Low revenue growth and high working capital levels indicate a need to focus on cash-to-cash and working capital performance.

Electric Component suppliers finished sixth. This segment is trailing the pack. That said, electrical component suppliers rank first in gross profit margins, suggesting low raw-material components costs, significant low-cost labor content and lower-than-average total landed costs. Lower-than-average raw material stability could be the result of longer-than-average supply chains. Lowest performance in cash-to-cash and inventory turns suggest opportunities exist in both working capital and inventory management.

For more information about PwC's North American Supplier Supply Chain study, visit or download PwC's 365 app.

The 2013 North American Supplier Supply Chain study assessed 102 automotive suppliers to determine  the effectiveness and efficiency rating for the six supplier segments; Exterior, Interior, Body, Powertrain, Electrical and Chassis. 

Using publically available data, PwC assessed supply chain performance by aligning 17 specific metrics to planning, sourcing, and delivery performance.  Rankings were then developed based on the weighting of these key metrics, to derive an efficiency and effectiveness score. The combined score determined the overall segment level ranking.  Each segment was ranked in comparison to other segments.  For more details about the methodology, please see page five of the full publication.

About PwC's Automotive Practice
PwC's automotive management consulting practice is creating a competitive advantage for its clients by changing the way companies operate. PwC's management consultants work with senior automotive executives to help develop and implement innovative operational strategies that deliver breakthrough results. The practice is a leader in operational strategy, supply chain, product development, strategic sourcing, and manufacturing. PwC has automotive resources in every automotive market around the world. For more information, visit

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