BMW AG will extend its cost-cutting COMPETE program to its German supply base at the end of the summer, said Senior Purchasing Vice President Wilhelm Becker, and the targets will be aggressive.
'The goal is to get 20 percent cost reduction over two years,' Becker said, with a minimum 10 percent reduction.
The program is expected to help BMW slash in half the number of suppliers it now uses in Europe.
COMPETE stands for Continuous Management Program for Efficiency and Technical Excellence. Under the program, suppliers bring cost-reduction ideas to BMW, which helps implement them.
The program currently is focused on Britain and BMW's Rover Group subsidiary. COMPETE consists of a team of 50 purchasing and engineering people in Birmingham, England. Half the team currently comes from BMW and half from Rover.
As it spreads its mission into BMW's home base in Germany, the team hopes to begin showing results within two months. Becker said the group will evaluate new supplier ideas within 40 days.
FOCUS ON ROVER
'We have focused on Rover first because there is a lot to do at the moment to bring Rover suppliers to the world-class level we have at BMW,' he said. There should be no difference in quality, cost or logistics from the BMW suppliers, Becker said.
The aim is to bring BMW to a cost level comparable with mass producers in Europe. 'We are a long way from that,' Becker said.
The Rover side of the program, which was launched in mid-January, is going well, he said. BMW has been asking suppliers for help in reducing costs rather than requiring it.
'A lot of U.K. suppliers have put in ideas,' Becker said. 'There is a lot of waste we can eliminate.'
The team is working on future models as well as the Rover 75, he said. New products are looked at to see what might be overengineered or fail to deliver value to the customer.
THE BAD NEWS
Becker said the Rover 75 failed to hit its cost targets. The problems were related partly to the high United Kingdom exchange rate. But another factor is that some suppliers in the United Kingdom are 10 to 15 percent less productive than suppliers in central Europe.
'Most of the suppliers use old production approaches,' the purchasing executive said. 'We need to show them what is done with leading-edge technology. It may require additional investment. If the supplier wants to remain a supplier with the BMW group, they have to invest.'
The other bad news is that BMW and Rover have too many suppliers, he said. There are more than 1,500 now. Becker said '600 to 800 would probably be the right number.'
In one case, BMW uses 18 suppliers for its locks. That number will drop to one in the next few years.
BMW merged the Rover and BMW purchasing teams at the start of 1999. Since 1997 BMW had operated coordinating committees between the two brands, but that complicated decision making, Becker said. The new structure will speed decision making and give suppliers clearer contact with the automaker.