When SEG Automotive was carved out of parent company Bosch, the company manual had to be ripped up and rewritten, including suppliers’ terms.
Think German engineering, and one of the names that might spring to mind would be Bosch. Founded more than a century ago, the firm has built its reputation on automotive parts, power tools, home appliances and more.
In Bosch SG, starter motors and generators were developed and produced, including the automatic start/stop system in vehicles we use today. Until last year, when the division was sold on to the Zhengzhou Coal Mining Machinery Group.
In order to successfully remove a key division from a behemoth parent, the change management team faced the challenge of working on a reduced scale and engaging smaller suppliers, and also had to deal with a longstanding workforce, many of whom had been with the company for two or three decades.
Bosch is a prestigious employer in Germany, and many of the staff started from university and stayed, explains Nina Bomberg, who was brought in to aid the transition from Bosch SG to SEG Automotive.
Bomberg spent three months working within Bosch before the transition officially took effect just over a year ago in January 2018. As global lead buyer, Bomberg was tasked with designing processes after the carve-out in cooperation with local sourcing, cross-functional partners and suppliers.
It was her job to redefine the global strategy for the sourcing of all investment goods and manage the supplier portfolio in Europe, Asia and Latin America for the new company, which now employs 8,000 employees at 16 sites throughout the world.
Where there were 9,000 people working in outsourcing at Bosch, there is now a team of 35 employees at SEG who negotiate procurement for lab equipment, test equipment and product parts.
“There are many things that Germans excel at, but change is an uphill path,” says Bomberg. “For many of these people, Bosch had been the only way of working they knew.”
At first, the change was a shock for many employees, explains Bomberg, who describes working at Bosch as like being “part of a small city”. Its size and scale means Bosch has its own processes for everything, with a central department to take care of areas of which no-one in procurement had experience.
“After the carve-out there was only one person who knew how to organise customs clearance, and no-one knew how to do export,” says Bomberg. “When we first moved, there was no one in charge of treasury. That’s a €2bn company that doesn’t know how to do cashflow.”
It has been a steep learning curve, she says, and one made all the more tricky by the initial change management team, who Bomberg explains had two years from 2016 to prepare for the move, but who were mostly staying put at Bosch themselves.
“If I was packing up my husband’s Ming vases following our divorce,” she says, “I wouldn’t necessarily care if they broke. I feel that if those people had to live with the processes they put in place afterwards, they would have organised it differently.”
One year on, the company is still feeling the impact, she says, but the difficulties have led to many realising there are different ways to achieve the same goals. One huge change has been that SEG now seeks more of a partnership with its suppliers. As Bosch SG, the company used to work only with “industry A-players”, says Bomberg. “Now some of them are not interested, as our revenue is not big enough.”
This has given the business the opportunity to look at ‘hidden champions’, for example local companies. In many cases Bomberg thinks SEG can now be far more flexible regarding suppliers.
“We used to need pages of approval for suppliers. Now we have the opportunity to right-size our supplier base and try new ways of working,” says Bomberg. “It means newer, less proven, more innovative suppliers from all over the world can become part of our supplier base. There was a small part of a starter motor
that we asked a new Chinese supplier to make, which used to do its job in 24 seconds. They said they could make it but asked to alter it – now it
takes 14 seconds.”
According to Bomberg, Chinese engineering used to be considered “a little worse and a lot cheaper”, but now it has changed. She believes it is still cheaper, but sometimes the engineering can even be better. But would these relationships have been possible before the advent of the newly independent business? Bomberg says not. “Bosch would have said it’s too risky. And this supplier would never have made the selection criteria.”
However, it has not all been this positive. Suppliers used to respond to a request for quote (RFQ) from Bosch SG within two weeks at the most, but now some are taking around six weeks to respond to an RFQ from SEG Automotive, which does not carry the same clout. To Bomberg, this was an obvious and natural course of events, and the lesson here is to manage expectations.
“We have dropped in their priority scale. Colleagues say to me it shouldn’t be this way, but all businesses have to look after their biggest clients. For many of our old suppliers, our business now is just a rounding number.”
The experience of working with new suppliers has shown many employees that not all companies have the same levels of bureaucracy as Bosch.
“There used to be an incredible amount of due diligence, which was so normal to everyone at Bosch. If you told them you don’t need a physical signature on a purchase order, they would look at you as if you were from another planet.” Reducing red tape has encouraged the business to work faster, Bomberg says. “There is still room for improvement. We have been working on processing purchases more quickly.”
Today, with two or three global or local buyers at each site, Bomberg believes the procurement team is far closer in terms of working relationships. People seek input from one another rather than the central office. “Naturally some countries have closer relationships, but this is an area that has seen positive change,” says Bomberg. But it is important to remember different cultures work at different paces.
Almost 95% of the existing management were contracted to stay after the move, which Bomberg believes was helpful from a continuity perspective, but not from the change management side.
Now that there is more normal fluctuation in the workforce, new people are coming in, which she says gives the business more “diversity of thought”, deemed vital in a company with such a long history.
She admits there is still work to be done: “Not everyone is ever going to be completely happy, and they say you never get the buy-in of the last 10% of people in any change management process.”
For now, SEG Automotive may not have the
route entirely planned, but as Bomberg says:
“We are on a journey.”
Towards a cleaner future
From its early days in 1914 when cars were cranked by hand to start, to today’s hybrid and electric cars, the starter motors and generators division of the Bosch Group has been a major presence in the automotive market. Since becoming an independent company in January 2018, the SG division has become SEG Automotive, in recognition of the additional ‘components for electrification’.
CEO Ulrich Kirschner says the new company is renewing its commitment to the reduction of CO2 emissions.
“Even though e-mobility continues to gain ground,” he says, “the combustion engine will be a pillar of individual mobility for years. This presents manufacturers with major challenges with regard to reducing fleet consumption and requires new solutions to achieve climate goals.”
The company claims its Boost Recuperation Machine can reduce fuel consumption and CO2 emissions by about 15%. The machine enables energy storage via a 48-volt electrical system to save fuel, gives a performance boost when overtaking and can allow coasting with the engine switched off, it says.
“The efficiency gains are not just a matter of theory and only relevant on the test bench: SEG Automotive products reduce fuel consumption and CO2 emissions under real-world conditions every day,” says Kirschner.