David Owen, global purchasing director at JLR, said game theory was critical to the company's success
David Owen, global purchasing director at JLR, said game theory was critical to the company's success

Jaguar Land Rover purring thanks to game theory

A close collaboration with TWS Partners AG (TWS) has helped Jaguar Land Rover (JLR) to achieve a global turnover of £22.2bn in 2015-16, the CIPS Annual Conference heard.

David Owen, global purchasing director for production and aftermarket parts at JLR, said implementing TWS’ game theory had been critical to his company’s recent success.

“JLR is a business that is growing rapidly and not only are our volumes growing, our reputation is also. But in 2008 we had our very own Brexit,” said Owen, referring to TATA Motors' aquisition of the firm.

Eight years ago TATA Motors paid Ford £1.3bn for JLR. At the time, Ratan Tata, then chairman of an Indian group with small cars and trucks in its motor portfolio, was told he was out of his depth in attempting to succeed where Ford, BMW and others had failed in making JLR profitable.

“When we became a subsidiary of TATA we became a much smaller fish in the pond," said Owen. "We had to decide how we would operate as a standalone business in this new environment without the buying power of Ford. 

“We also realised that one of our biggest strengths was that we were now able to make decisions quicker by being more agile and entrepreneurial in our thinking and approach than our competitors. Which brings us back to 2008 when we met TWS at a conference and had some tremendous successes with them on some short term projects using their idea of game theory.”

Marcus Schreiber, CEO at TWS, said: “We are all connected and our actions influence each other and game theory is essentially the scientific approach to analyse these complex and strategic interactions. Game theory doesn’t just bring improvements case by case it can be used as a game changer for the way a company sees purchasing.

He added: “We consider ourselves a corporate anti-trust authority – and people use game theory and us to get a sustainable competitive advantage.”

Owen, whose team controlled a spend around £13bn in 2016, said: “For us game theory can be described as three key pillars: commitment and empowerment, negotiation process and a full ‘if, then, else’ process. We also aimed to put purchasing into the centre of the decision making process, which gave one consolidated voice regarding supplier selection.”

The process also helped JLR come up with its Strategic Commodity Dossier (SCD),  which covers supplier options and technologies, markets and competitive landscape, and the ability to shape markets.

 “What the SCD really does is bring a level of clarity to the buyer, what’s the nature of the market and how able am I to influence the market. It is now an integral part of the company’s strategy setting process," said Owen.

The figures stack up, too. JLR is the largest vehicle producer in the UK, selling 521,571 vehicles in 2015-16 and its production purchasing department will spend more than £12bn in 2016 alone.  

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