BMW will require suppliers to absorb more of the cost of raw material price rises in the future.
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Purchasing chief Herber Diess told Automobilwoche that, since 2004, raw materials price rises have added an additional EUR800m in costs, of which EUR700m have landed on BMW’s books. This has had a big impact on the company’s financial results.
“We have partners that have managed to pass on to us 100% of raw material prices rises, and a few have even managed to pass on 110%,” said Diess. In the future Diess said he wants price rise penalties to be shared three ways – between the second tier supplier, the first tier supplier and BMW.
In his first interview since he took over as head of purchasing eight months ago, Diess said that complaints from suppliers that BMW is piling on the cost pressure are unfounded.
“Our primary requirement is quality. We have a strong competitive position here but we want to be better. When we are agreeing targets with suppliers, we agree quality improvement goals first and then we talk about reducing costs,” he said.
BMW is running a programme of ‘process weeks’ with around 80 partners to analyse all production steps to see if throughput times can be reduced or if any redundant steps can be taken out. The first 40 of these weeks will be completed before the summer.
“At one supplier in the UK, for example, we discovered that certain testing was being conducted twice, once by the supplier and once by us,” he said.
Diess said the goal is to optimise the supplier’s productivity and benefit from his progress.
BMW is aiming to save EUR6bn in costs by 2012 under its ‘Number One’ strategy. EUR4bn of this cost-saving should come from purchasing.
