Birgit Behrendt, vice president of purchasing at Ford of Europe, said that Ford’s supplier strategy reflects the tough environment facing car makers at present.
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Behrendt said that the car makers have been facing a difficult situation, in particular the mass producers.
Since 2003 Ford has been working on its turnaround strategy with a successful step in restructuring in the first year and strong growth in Turkey and in eastern Europe. Ford had a strong recovery in Europe in 2004, said Behrendt.
But Ford is facing high variable marketing costs and in addition has had high launch costs for the new Focus. It is seeing benefits and increased customer satisfaction but there is no prospect of volume growth in the market as a whole, said Behrendt, and negative price developments make for a tough value equation.
Ford’s supplier strategy reflects this market environment.
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By GlobalDataPurchased goods account for over $90 billion at Ford worldwide, or two-thirds of turnover.
“Not only price but also technology and functionality have to start with benchmarking – that sets the goals,” said Behrendt.
But Behrendt admitted that Ford has needed to look hard and quickly at what has triggered costs.
“We were in a hurry.”
Ford has deployed a number of strategies in Europe to cut cost.
One of the key processes for the turnaround on the purchasing side has been Ford’s cost reduction through Team Value Management (TVM).
This process was developed at Ford in Europe and works to optimise the costs of the processes through several approaches, including a reduction in complexity and variability and a greater focus on reusability.
Over 80% of the global purchasing volume has been covered by TVM, said Behrendt, and it has been applied across brands.
The process requires relative openness and mutual exchange of information to guarantee success.
Since October 2003 TVM has been applied over the complete range of components including restraint systems, air conditioning systems, audio systems, steering systems, transport and transport containers.
“Ford has proved TVM works”, said Behrendt, pointing to suppliers such as Delphi, that are implementing a similar system themselves.
She said that the TVM is not about putting pressure on margins, but about reducing unnecessary costs.
Ford has been looking to bigger volumes to improve its scale economies, with the old Focus running at around 600,000 units a year, while the new C1 architecture underpinning the C-Max, S40 and Mazda 3 is at a volume of over a million.
“That makes it easier to invest in technology.”
Ford has also looked at developing its emerging market sourcing, which in Europe has meant building on its solid supplier base in central, eastern Europe and in Turkey.
Behrendt underlined that she sees Ford’s suppliers as very important to the turnaround at the company in Europe. “The supplier has a relatively large part in the success of the car maker.” It is “our most important partner.”
Ford has worked with almost all its suppliers for decades, and is looking to work with those partners to maintain its competitiveness.
Material costs are high, but suppliers need time to change.
“I think we try to meet the suppliers halfway. We know that suppliers have technology we can’t do without” she said, “so we are always looking for a common solution.”
Behrendt said that Ford listens to its suppliers through its international supplier advisory council and other forums.
Ford of Europe has initiated a number of supplier forums that take place regularly, such as its annual top supplier meeting, Executive Champion meetings and other supplier meetings. Open communication is a key element in our supplier relationship, Ford said, and it will continue to provide the forums – individually or in round tables.
The aim of these programmes is to achieve mutual trust and respect.
Behrendt said that central European suppliers and OEMs must stand together, otherwise the “mid-European industry will disappear”.
She added she was keen to keep the door open to medium-sized suppliers.
“We are often asked ‘how many suppliers do you want to work with’, and the answer is there is no general answer”.
Innovation capability is not necessarily to do with size and she “wants to keep competition because that improves innovation”.
Ford also believes that it has laid to rest supplier concerns about the legality of its global terms and conditions. After an informal meeting with CLEPA, the European supplier’s association, in January to discuss the legal issues around Ford’s Global Terms, there has been no further contact with CLEPA on this issue.
“We assume that we have addressed CLEPA’s concerns to its satisfaction” a Ford spokesman said.
SupplierBusiness.com
