Ruediger Koch, the board member responsible for Volkswagen Group purchasing in North America, considers VW's International Suppliers Fair to be an important platform for suppliers. That's because he firmly believes that personal contact can be crucial in working with VW. The fair, or IZB, is a VW Group event where current and prospective suppliers are invited to Wolfsburg, Germany, to show their wares.
VW purchasing boss urges contact with suppliers
Koch, 52, has been a board member at VW de Mexico since July 2008. In previous positions, he oversaw purchasing at VW subsidiary Bentley and from 2002 to 2004 headed VW Group's powertrain purchasing.
He spoke with Klaus-Dieter Floerecke of Automobilwoche, an affiliate of Automotive News, ahead of the IZB, which was scheduled for Oct. 6-8.
The United States and Canada are the IZB's partner countries this year. Why is this event important for North American suppliers?
The IZB offers suppliers a platform to present themselves as a company, along with their product portfolio and expertise, to all the VW Group brands as well as other European automakers. That's why I consider this event to be very important for U.S. and Canadian suppliers.
Can you clarify that?
Given the VW Group's goal to sell a million vehicles in the United States in the middle term, a trade fair of this kind produces interesting opportunities on each side for establishing contacts for future joint projects as well as the expansion of already existing projects. In this way, new suppliers find it easier to make their first contact with the VW Group. That's because personal contact is crucial for successful cooperation.
How has the North American supplier industry recovered from the crisis? What in your estimation have suppliers learned from it?
The current trend shows that the U.S. auto industry is recovering slowly from last year's crisis. Sales figures for the North American car market rose about 16 percent in July compared with the previous year.
The North American supplier industry has reacted to the crisis with a variety of measures. For one thing, many suppliers have improved their internal processes and structures, becoming leaner and more efficient. For another, there has often been a shift in the customer portfolio. Many suppliers are concentrating on the acquisition of new projects from European and Asian OEMs, so they don't only depend on Ford, GM and Chrysler.
What's the condition of U.S. and Canadian suppliers with regard to supplier quality, including product and process quality?
We have already designated 34 new North American suppliers for our new factory in Chattanooga and our plant in Mexico. We were positively surprised by the prevailing product and process quality. But the VW Group's quality requirements often deviate from the customary standards in the U.S., so we proceed under the assumption that these suppliers have to go through a certain learning process to become acquainted with VW.
We are well-positioned for cooperation with these suppliers as partners. Our specialists counsel and support our suppliers so they can reach our quality objectives and jointly carry out our new vehicle projects.
Are there areas in which the European auto industry is even better positioned than the North American industry?
Today, many suppliers have set up branches and development centers globally in Asia, North America, South America and Europe, invariably near OEMs and their target markets. As a result, technological expertise cannot be attached to a location. That's the reason I see no difference between European and North American suppliers. Certainly it's an exciting task for us and for all the VW Group's new suppliers to adjust to one another.
What basic qualities do you expect from your suppliers?
Today I expect stable, reliable product quality; ongoing product innovation and new ideas; financial stability; and, above all, a sustained competitiveness in the market environment.
In recent years there have been numerous joint projects between manufacturers. Do you also expect greater cooperation from your component makers to reduce development costs and achieve economies of scale?
Yes, I expect increased cooperation and teamwork among suppliers to reduce development costs and achieve economies of scale, as you correctly mentioned. Consolidation in the supplier industry will continue. We are already observing this trend in certain sectors, such as vehicle electronics. But this can only be successful if the competitiveness of the products is maintained.
Raw material costs have risen in recent months. How do you deal with suppliers that would like VW to share in these costs?
We work intensively with our suppliers to check and approve local materials for our products in their markets. In this way, together with our suppliers, we strive to become independent of foreign currency fluctuations by localizing our raw materials.
Where do you still see potential for savings in purchasing?
We continue to work on improving and standardizing our processes in purchasing so we can become more efficient. We expect the same thing from our suppliers. Additional cost improvements can be realized through greater efficiency in the use of materials and in processes. Furthermore, we continue to analyze new suppliers and investigate their potential for savings with our global process for requests for quotations.
When you identify a supplier's potential for savings, how does the cooperation with the company proceed?
Our cooperation with suppliers works very well and is based on partnership. That's because the joint identification of the potential for savings makes it possible for the supplier to improve its competitiveness and can therefore secure additional projects, such as follow-up orders. We benefit from this, and so does the supplier.
Are you satisfied with your supplier structure, or do you want to make corrections, such as reducing the total number of suppliers?
We are very satisfied with our current supplier structure in North America. With the new factory in Tennessee and new projects at Volkswagen de Mexico, we have succeeded at deliberately selecting 34 new suppliers in North America and at grooming them for Volkswagen's standards. At the same time, we took advantage of the opportunity to selectively terminate uncompetitive suppliers in certain areas.
The trend toward the electric car and other powertrain alternatives is bringing new players into the game on the supplier side as well as the manufacturer side. What are you doing to find the right partners, and how are you making sure they can meet the vehicle industry's quality standards?
We are using targeted workshops to find the right suppliers for new components, along with internal competitive analyses and our global purchasing offices. Like all new suppliers, we help them with our processes and groom them to become Volkswagen suppliers.
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