The picture of Volkswagen’s purchasing policies presented in a recent SupplierBusiness.com/Automotive News Europe survey of suppliers in Europe underlines how the reality of its purchasing is at odds with Volkswagen’s brand position.
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SupplierBusiness asked suppliers how they saw 15 car brands that make cars in Europe.
The results showed that suppliers see Volkswagen as primarily price-driven in its purchasing (second only to Ford in its price focus). But suppliers think that Volkswagen is only the fourth most successful car maker in terms of actually obtaining low-cost parts. Volkswagen is also seen as being relatively undemanding on quality (fourth from bottom) and on the demands it places on suppliers for the testing and validation of parts.
Volkswagen purchasing executives insist that the company aims for high quality in purchasing, and that the company is positioned as a premium mass brand, but the perspective of suppliers ties in with the Volkswagen tradition of weak JD Power quality survey results.
There also does not seem to be much trust in the relationship, despite the partnership element stressed in Volkswagen’s PPO (partnership-based process cost optimisation) project launched two years ago.
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By GlobalDataThat programme had resulted in 2,500 ideas with a potential value of €1 billion in identified cost savings. But suppliers say that Volkswagen is less willing than most car makers to share the benefits of cost saving ideas (third from bottom), and relatively unwilling to pay for development costs for new products (fourth from bottom in the rankings).
Overall the company scored relatively poorly in the level of trust among suppliers in commercial partnerships with Volkswagen. While not many suppliers scored Volkswagen “very low” in the survey (Ford, Fiat or General Motors attracted more criticism), more than 40% of suppliers thought they could place a “low” level of trust in partnerships with Volkswagen.
If companies such as BMW and Toyota are right about the need for long-term partnerships and trust in relationships with suppliers to get the best performance out of them, Volkswagen clearly has a lot of progress it can make.
Bernhard’s new direction addresses weaknesses
There are signs that the new purchasing initiatives at Volkswagen are not simply cost-down drives, but that they involve a more fundamental re-think of the way that Volkswagen buys.
Purchasing executives at Volkswagen have said that they want to shift away from the company’s current focus on competitive bidding to work earlier and more closely with suppliers on cost reduction ideas.
Volkswagen’s basic approach has not changed since the Lopez era in the early 1990s. The company has emphasised using the pull of its volumes to get competitive quotes in from a wide pool of potential suppliers.
But it in the meantime other car makers have built up volumes and seem to be more successful with longer-term relationships with suppliers using the Japanese model.
Wolfgang Bernhard says that the group must now look to Toyota as its benchmark.
