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OPTIMIZING OEM-SUPPLIER RELATIONSHIPS FOR COST EFFECTIVE and FASTER  PRODUCT DEVELOPMENT CYCLE
TEN KEY TRENDS ARE AFFECTING OEM-SUPPLIER RELATIONSHIPS Development Purchasing Production Sales Development Production Sal...
SIX  LEVERS FOR OPTIMIZING THE OEM-SUPPLIER INTERFACE ADVANCED DEVELOPMENT CONCEPT DEFINITION & COMPETITION SERIES DEVELOP...
Volume Approach OEM’s APPROACHES TO THE INNOVATION-PURCHASING PROCESS VARY BETWEEN TWO EXTREMES B A Suppliers Involved - 3...
STRUCTURING A SUPPLIER and TECHNOLOGY- ORIENTED PURCHASING ORGANIZATION OEMs HAVE TWO BASIC OPTIONS FOR POSITIONING  THEIR...
A BEST PRACTICE STRUCTURE FOR AN OEM PURCHASING ORGANIZATION  INCLUDES STRATEGIC SUPPLIER MANAGEMENT Systems Purchasing Co...
TREND AND SUPPLIER SCOUTING BEGINS WELL AHEAD OF THE PRODUCTION CYCLE Vehicle Project Start Advanced Development Stage Con...
PURCHASING DEPARTMENT CAN BE STRUCTURED IN FOUR WAYS Leading Role Joint Decision Minor Role Brand Committee Platform Commi...
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Purchasing Innovation Summary

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Purchasing Innovation Summary

  1. 1. OPTIMIZING OEM-SUPPLIER RELATIONSHIPS FOR COST EFFECTIVE and FASTER PRODUCT DEVELOPMENT CYCLE
  2. 2. TEN KEY TRENDS ARE AFFECTING OEM-SUPPLIER RELATIONSHIPS Development Purchasing Production Sales Development Production Sales Purchasing Supplier Trends Interface Trends OEM Trends 1 Supplier consolidation 2 Supplier as systems integrators 3 Supplier as drivers of innovation 4 Partnership programs 5 New business models 6 Slower-than-anticipated adoption of e-procurement 7 Shortening innovation cycles 8 Increasing challenges on quality 9 Increasing product differentiation 10 Global sourcing Delphi Visteon Lear Magna TRW Aisin Seiki Illustration Suppliers Bosch Denso Johnson Controls Continental Faurecia Dana GM Ford Toyota VW Renault Nissan Illustration OEMs BMW DC PSA Fiat Hyundai Honda
  3. 3. SIX LEVERS FOR OPTIMIZING THE OEM-SUPPLIER INTERFACE ADVANCED DEVELOPMENT CONCEPT DEFINITION & COMPETITION SERIES DEVELOPMENT RAMP-UP - 120 months - 48 months - 36 months - 12 months Start of Production CREATE AN INNOVATION FOSTERING ENVIRONMENT FOR SUPPLIERS LEVERAGE SUPPLLIERS’ R&D CAPACITIES & PRODUCT & MARKET KNOW-HOW ALIGN THE OEM ORGANIZATION FOR EFFECTIVE INTERACTION WITH SUPPLIERS DIFFERENTIATED REMUNERATION OF SUPPLIERS’ R&D EXPENSES CONSTRUCTION OF INNOVATION PLATFORMS EARLY INVOLVEMENT OF SUPPPLIERS IN THE INNOVATION PROCESS COOPERATION BETWEEN AND COLLOCATION OF INTERNAL R&D AND PURCHASING TREND AND SUPPLIER SCOUTING STABILIZATION OF THE INNOVATION PURCHASING PROCESS 1 2 3 4 5 6 OEM’s CAN USE SIX (6) LEVERS TO OPTIMIZE THE OEM-SUPPLIER INTERFACE
  4. 4. Volume Approach OEM’s APPROACHES TO THE INNOVATION-PURCHASING PROCESS VARY BETWEEN TWO EXTREMES B A Suppliers Involved - 36 months A SERIES DEVELOPMENT HIGH Relationship Stability and Transparency in Development phase - 12 months Start of Production RAMP-UP SERIES PRODUCTION X - 120 months - 48 months ADVANCED DEVELOPMENT CONCEPT DEFINITION AND COMPETITION A A B OFTEN MEDIUM Supplier Involvement In advanced development Competition Intensity in Bidding phase A B C A D X B B Dual Development Last-minute competitor Premium Approach RARE HIGH LOW 6 LEVERS FOR OPTIMISING THE OEM-SUPPLIER RELATIONSHIPS B A
  5. 5. STRUCTURING A SUPPLIER and TECHNOLOGY- ORIENTED PURCHASING ORGANIZATION OEMs HAVE TWO BASIC OPTIONS FOR POSITIONING THEIR PURCHASING ORGANIZATIONS ORGANIZATION STRUCTURE PROs CONs PURCHASING R&D PRODUCTION CEO PURCHASING R&D PRODUCTION CEO Allows bundling of purchasing volumes, especially in multi-brand companies Allows bundling of purchasing Volumes, especially in multi-brand companies Allows optimal purchasing integration with R&D and suppliers in order to drive innovation Can diminish the drive for cost reduction because of the dominant technology focus Still prevalent in these OEMs GM Ford Toyota DC VW Renault Purchasing is independent, top level function Purchasing is combined with R&D and Production Partly implemented at these OEMs PSA (Peugeot-Citroen) BMW Strategic Supplier Management Logistics Project Sourcing Quality Management
  6. 6. A BEST PRACTICE STRUCTURE FOR AN OEM PURCHASING ORGANIZATION INCLUDES STRATEGIC SUPPLIER MANAGEMENT Systems Purchasing Components Purchasing Non-production Purchasing Strategic Supplier Management PURCHASING Brands/ Platforms/ Models System Groups 1 Component Groups 2 Regions New Business Models 3 General Supplies Production Facilities Cost Engineering Supplier development Trend and supplier scouting Partnership Programs Quality Management Currently in place at most OEMs Partly in place Absent from most OEMs 1 Complex systems & modules are provided by a few suppliers – relationship management is needed (e.g. integrated interiors. 2 Components are provided by a large number of suppliers – sourcing takes place through standardized processes and business-to-business platforms (e.g. tyres and batteries). 3 This department handles BOT (build-operate-transfer) models and supplier parks.
  7. 7. TREND AND SUPPLIER SCOUTING BEGINS WELL AHEAD OF THE PRODUCTION CYCLE Vehicle Project Start Advanced Development Stage Concept Definition Stage Market Research Strategic Supplier Management Advanced R&D Market Trends Supplier Trends Technology Trends Trend Supplier Scouting Project Sourcing Platform Engineering Identify new, relevant Technologies … … assess corresponding suppliers and include them in an “observatory panel” … … and choose the best to include in new projects Handoff About 10 years before the start of production Four to five years before the start of production Trend Sources Trend Identification Supplier Pre-screening Supplier Monitoring Technology Matching Find appropriate Suppliers for identified trends Initiate first contacts Assess new suppliers Determine prices for new technologies Ensure on-going supplier benchmarking Maintain regular contacts Check financial evolution of suppliers Adjust prices for technologies
  8. 8. PURCHASING DEPARTMENT CAN BE STRUCTURED IN FOUR WAYS Leading Role Joint Decision Minor Role Brand Committee Platform Committee BRAND POSITIONING NUMBER OF BRANDS MODEL 2 MODEL 1 MODEL D MODEL C BRAND 2 MODEL 2 MODEL B MODEL A BRAND 1 CEO Purchasing Production R&D CEO Production R&D/ Purchasing MODEL 1 CEO Production R&D/ Purchasing CEO Purchasing Production R&D MODEL D MODEL C PLATFORM 2 MODEL B MODEL A PLATFORM 1 SINGLE MULTIPLE VOLUME PREMIUM 1 2 4 3

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