Massive recalls of certain products can put a huge dent in an enterprise's yearly earnings. As such operations are based upon the quality of goods, businesses could consider the benefit of outsourcing to companies that provide procurement services. Both raw and finished materials used to manufacture complex items such as spark plugs, tires, air ventilation machinery and other commodities need to be properly assessed before they are funneled into the production process.
Automotive industry takes a hit
According to Manufacturing.net, Ford recently announced that it will recall more than 692,000 Escape small SUVs and C-Max gas-electric hybrids in North America in order to resolve a couple of safety issues. One of the problems consists of a software glitch that can potentially prevent the side-curtain air bags from deploying in certain types of rollover crashes. Ford stated that dealers will reprogram the control system at no charge to customers. The second fault causes exterior door handles to bind and prevent entryways from closing properly.
BBC News reported that a spend analysis conducted by General Motors showed that the corporation recently doled out $1.3 billion to cover the cost of recalling cars possessing defective ignition switches, allocating $300 million to supply its customers with courtesy vehicles. Chuck Stevens, GM's chief financial officer, noted that the operation puts a blemish on the company's strong performance over Q1 2014.
What is e-procurement and how does it factor into the equation?
Industry experts are aware that automotive manufacturers typically source finished products from different businesses in order to assemble their vehicles. In order to figure out which companies will supply them with the best materials, carmakers should consider outsourcing to companies that provide e-procurement services. Michael Fournier, a contributor to Business2Community, noted that Web-based materials acquisitions systems reduce transaction costs and connect executives with professionals who can provide them with certain products, items or commodities.
Detailed, comprehensive information regarding companies registered on an e-procurement website enables organizations to figure out which services are the best fit for them. For example, GM may have been able to avoid its ignition switch recall if it had obtained a better overview of the production process implemented by Continental Automotive Systems (the enterprise that provided the devices) and employed a better supplier relationship management solution. BBC News noted that the mishap has been linked to at least 12 deaths - a factor that could damage the automotive manufacturer's good name.