19 June 2008
BMW wants its suppliers to share the burden of high material costs as it attempts to save ?4 billion (£3.2 billion) by 2012.
The German car giant said it absorbed ?750 million (£600 million) of increases in material costs last year. So as part of its "number one" efficiency strategy, it has launched a programme to help streamline manufacturing and deliver savings.
Michael Ganal, chief financial officer, said ambitious price reductions could be made throughout the supply process. "We believe the lion's share of the targeted potential [savings] can be tapped in the area of material, production and development costs."
Teams of purchasing, logistics, quality and accounts experts assisted suppliers with the] project. They consulted with vendors during workshops, evaluated areas in need of improvement and developed a plan of action. By encouraging efficiency through the supply chain, BMW hopes to improve workflows and reduce supply times "significantly".
A spokesman said it is too early to say if the initiative is delivering savings. But he confirmed lead times are being cut as the company completes the first phase of the programme with more than 70 of its largest suppliers. "Measures in purchasing, by far our largest block of costs, need time until they start to have an effect."
This month, in an interview with German auto magazine Automobilwoche, Herbert Diess, BMW's head of purchasing, said although sharing costs with first and second-tier suppliers was important, the main priority was securing quality products.