Harry Plopper

BMW's attractiveness as a partner has fallen markedly since the last BMW supplier satisfaction survey conducted in October 2003. The results of the February 2005 survey conclude that suppliers are losing trust in BMW and that the quality of communication between BMW and its suppliers has fallen.

The major area of contention, according to our survey, is cost pressure. In the first survey BMW rated as one of the most attractive OEMs for suppliers to do business with. While on many counts the results for BMW have remained broadly similar, on that specific measure, BMW's attractiveness as a partner now rates more closely to that of DaimlerChrysler or Premier Automotive Group than Toyota. A negative result on this point tends to indicate that suppliers are thinking more carefully about whether business contracts really make financial sense.
In the past suppliers would win contracts and then try to make them work financially over the life of the contract. Now, suppliers are thinking a lot more carefully about whether contracts make sense beforehand. This clearly applies to BMW as much as any other OEM.

Like Toyota, BMW is focusing on long-term relationships and this is causing some frustration that it can be difficult to break existing relationships and win new business, particularly for small and mediumsized suppliers. Innovative technology, management or organisation are the main attributes that will win BMW's attention.

Given the increasing cost pressures that are being felt across the automotive sector, it is not surprising that BMW and its suppliers are feeling this pressure too. "BMW started to reduce prices to increase pressure on sub-suppliers," said one respondent. "BMW cost controlling demands a lot of capacity from the supplier," said another. "There is little willingness to solve older outstanding cost problems," said yet another.

Nevertheless maintaining and strengthening communication and trust is an important focus for the BMW purchasing department, particularly on this cost issue. According to Dr. Klaus Richter, Head of Materials Purchasing at the BMW Group, "you need to get a better insight into the operations of a supplier, to identify the substance of the cost reduction potential. Then you basically change the content or the technology of the product, which results in cost reductions and not just in price reductions." He continues, "what we call the Quality and Cost Initiative, launched in January last year, is aimed at exactly this approach."

BMW claims to have actively sought support for this initiative from its supply base and has held annual meetings in 2004 and 2005 to review processes with suppliers. This joint co-operation, aimed at addressing increasing cost pressures without compromising quality is based on transparency and suppliers are actively encouraged to generate costdown ideas, which focus on the technical specification of parts with no negative impact on quality. Resulting ideas are then evaluated and driven via engineering through to implementation.

BMW expects benefits for suppliers to include:
- having a clearly identified and committed BMW platform to jointly work with on ideas to improve product, process and reliability;
- having an opportunity to address the cost of quality (warranty) thus improving their 'bottom line';
- fair and open exchange of ideas with potential benefits to improve product, process and reliability;

Changes in BMW's demands in the last year (2004):



The responses are analysed statistically and represented in an index. Zero would mean no change, +1 would mean 100% of respondents said the criteria had increased. -1 would mean all of respondents said the criteria had decreased.

Source: report on supllying BMW AG

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BMW_Dude

Interesting read!

To me BMW should pay for development costs more, they are getting more sales because they have new technology!

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