Audi wants to be recognized as a technological leader in the auto industry. But it also has a role to play in Volkswagen Group's component-sharing policy. Automotive News Europe's Edmund Chew talked to Erich Schmitt, director of purchasing at Audi AG, about the pressure to cut costs while maintaining good relations with suppliers. What follows is an edited transcript of their conversation.
How are you trying to improve your purchasing operation?
First, we have to achieve more stability into our processes - higher quality, in other words. This is one of the key items, especially for medium-sized suppliers. Next, we must persuade suppliers to be more innovative. Improved project control is another very important point. If we give up responsibility to our suppliers, it has to be to understood that they have to organize the tier 2 and tier 3 suppliers.
Audi was very advanced in setting up supplier parks and using modules for assembly. Do you expect to increase your use of modules?
Not really. If you look at the Audi TT, for example, we already use a lot of modules. There will be no dramatic increase.
Are you interested in buying more complete modules?
Our core business is engineering, and we want to retain responsibility for this at Audi. If we want to be a leader in technology, we have to make sure that we can develop our own parts. So we have to find ways to maintain full engineering responsibility in Audi for some components. At the other end, maybe for a low-tech part, we can give more or less total responsibility to the supplier.
How is your cost-reduction program progressing?
Not so badly. We are in a continual cost-cutting process. For me, cost cutting is something you need, like water. It is a must, so there is no need to discuss it.
How do you become more innovative?
The most important point is to make quick decisions about innovations. We have to show our suppliers that we can bring innovations to the market as quickly as possible.
How can you ensure better process stability?
I think we have to sit down together with our suppliers, and we have to find the weak points in our processes. We have to speak openly so that we can understand the main problems and do something about them.
How many suppliers do you have?
Between 760 and 800.
Will you reduce supplier numbers in the future?
Not really. Of course, we have bigger modules and systems with new projects. But more than 80 percent of our parts purchasing is with fewer than 200 suppliers. Although I expect some concentration in the future, reducing suppliers is not our main goal.
We want to have the most competent suppliers. If we need five, we will have five. The number is not important to me. I would expect that for the most part, we will maintain long-term relationships. I would expect a lifetime contract for high-value parts.
If you have good experiences with a supplier regarding quality, service and delivery, why should you change? It is not in our interest to change suppliers, so we want to work together for as long as possible.
Is the financial stability of suppliers becoming more important to you?
No. For me, it's more important to understand who the leaders of our suppliers are. So I want to know the three top guys at the company. If I know these guys and I know how they fight for business, that is more important than financial stability. I try to understand the management and understand the people.
Has the concentration of suppliers affected your business?
Not really. But I do not prefer to work with large companies. I prefer to work with fast and clever companies.