Structural competitiveness: how European automotive suppliers can better leverage their supply chains

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Supply chain is emerging as a crucial lever for maintaining a competitive edge in the European automotive sector. With automotive markets no longer growing at the pace expected during the early EV transition, many suppliers have been forced to restructure in recent years. While a certain degree of restructuring is unavoidable, the typical measures that companies take to adapt to demand slumps take time to materialize in the bottom line.

The good news for automotive suppliers is that they are positioned to leverage their supply chains to get an upper hand, and quick, targeted optimization can keep them from getting dragged down in a low-volume environment.

What’s driving restructuring

European automotive suppliers are under pressure to remain structurally competitive. Weak demand, declining revenues and high debt levels have forced them to reassess where and how they operate. EV output, while relatively strong, has lagged significantly behind projections. Workforce reduction has become a painful reality across Europe’s car-parts industry, with more than 100,000 jobs lost in two years and 40,000 jobs lost between mid-2025 and mid-2026 in Germany alone. At the same time, the costs of raw materials, rubber and plastics, as well as shipping and logistics, is expected to rise before the end of 2026.

For many suppliers, this means restructuring. Production capacity will have to be reduced, consolidated or reallocated to match market demand, and fixed-cost structures adjusted to a lower-volume environment. But it can take months or years before companies see measurable savings. Meanwhile, write-offs, compensation, ramp-down costs and implementation complexity further delay any financial benefit.

Leveraging supply chain for quick wins

This makes logistics and supply chain a critical short-term lever. Unlike production assets, supply chain networks can be adjusted faster, and logistics capacity can be reallocated to other industries when demand shifts.

In most cases, such optimization projects finance themselves within a few months – at most, within a year.

Tackling transportation spend with smarter network structures, rate negotiation and optimized utilization
Designing leaner layouts and deploying targeted automation to improve handling
Saving space with new storage concepts
Bringing down inventory holding costs with improved parameters and smarter positioning of stock across the network

How to reduce costs in automotive supply chains step by step

1. Baseline and as-is transparency

Start by establishing a reliable cost baseline. Collect all data relevant to your supply chain spend and interview team members across logistics, operations, purchasing, finance and other functions. The objective is to identify the main cost drivers within your organization. For fragmented automotive supply chains, this oftentimes means involving external partners, such as logistics or transportation service providers, since not all data will be available in-house. Full transparency on your current costs and performance gives you a clear idea of where you stand.

2. Development and evaluation of optimization measures

Next, translate that transparency into concrete optimization measures. Independent data analysis and findings from stakeholder workshops will help you identify and prioritize potential measures, for example: consolidating flows, reducing empty runs, reallocating warehouse space and more. Suppliers should prioritize immediate cost reduction over structure or process overhauls, and measures in inbound over outbound, where OEM or tier-1 customers exercise much more control. Each optimization measure should be quantified, challenged for feasibility and assessed against the operational reality of your network. This is how you develop a targeted portfolio of initiatives rather than a long list of theoretical ideas.

Some suppliers may feel the urge to once again involve their external partners at this stage. But it’s important to remember that many supply chain cost reductions translate immediately to external partners’ revenues and profits – most of the time, this is a zero-sum game.

3. Implementation preparation

With your portfolio of optimization measures in place, you can start taking action. Prepare corresponding fact sheets for each measure that clearly lay out implementation cost, savings potential and next steps. This creates a common language for all stakeholders, which is useful for getting everybody onboard and ensuring durable alignment. It also makes a proposed measure feel real, facilitating concrete implementation decisions that don’t leave promising ideas to languish in workshops. Due to the integrated nature of automotive supply chains, you should engage with your customers, suppliers and external service providers at this stage, in addition to your internal stakeholders. This circumvents show-stoppers and speeds up the implementation process.

4. Targeted implementation of measures

You’re finally ready to begin targeted implementation. Best-practice automotive standard is to advance measures through agreed implementation levels, from validated potential to realized savings. The focus should be on speed, pragmatic decision-making and measurable impact. Be sure to track savings transparently, so that progress, obstacles and realized effects remain visible to all stakeholders.

Cost reduction as competitive advantage

For European automotive suppliers, restructuring may be necessary, but it is not enough. Supply chain cost reduction offers a faster, more flexible lever to protect competitiveness while broader capacity and workforce measures unfold. Acting immediately allows suppliers to create transparency, identify savings, implement feasible measures and strengthen resilience. In a volatile market, the ability to reduce costs quickly, without damaging service or future flexibility, becomes a competitive advantage.

Author

Andreas Weber

Vice President
4flow