At the 2019 Original Equipment Suppliers Association conference last month in Novi, Mich., three purchasing directors spoke with Automotive News about their activities and the issues they face in 2020. A recurring theme for the group: establishing and improving working relationships with their supply chains as they navigate a new era of change and uncertainty.
Purchasing outlook for 2020
Sven Hommel, Hella Corporate Center USA
Head of North and South American purchasing for Hella's electronics division
The Northville, Mich., company is a subsidiary of the German automotive lighting and electronics supplier Hella GmbH. A new North American headquarters opened this year.
Q: How is Hella coping with the pressure for local sourcing in North America?
A: Local is nice, but in the end, we do best-cost sourcing. The bigger those parts become, local is better because transportation costs get incredibly high. We have a high share of electronic products. If you look at driver-assistance and radar, we have only four mechanical parts inside, so the overall product is 80 percent electronics. There, it is an issue to be local because the big production capacities are in Asia, so we're simply not able to. We have to import those parts.
What impact have tariffs had on the company?
Our factory in the U.S. is pretty much focused on electronic products, and the current tariffs mainly cover those parts. So we have to find ways to cover that in other areas.
What are you doing to get your own costs down?
We've had strong growth in the last few years and we are really working to tackle that growth through productivity and efficiency. We're using robotics for reading and recording invoices and also for preparing stand-up presentations. There are new technologies to drive productivity and efficiency and free people from non-value-added tasks, especially administrative tasks.
What are some of your goals for 2020?
The main topic is to identify future technology needs. In the future, it becomes more and more important to have partnerships with suppliers.
Jim Gavin, ADAC Automotive
ADAC Automotive, the Grand Rapids, Mich., supplier of vehicle door handles and exterior mirrors, is working with its own suppliers to integrate new technologies into its products to keep up with trends and innovations.
Q: Given the technology changes coming to door handles, are you creating a different supply base?
A: We're getting into electronics, and there are a lot of different key chip suppliers. There are things like NFC chips and Bluetooth. The phone as a key is a big, new trend, and different people have different technical solutions. Our team thinks that even gesture access is going to come, where you're not even going to touch your handle.
Are you adding business to your suppliers or pivoting toward new suppliers?
On the mechanical side of things, it's really the same suppliers. We still need injection molding suppliers, we still need fasteners suppliers, we still need a lot of the same things that we've been doing with our mechanical door handles. It's just that now, in addition to that, we're packaging the electronics inside of it. So I would say we're really adding more suppliers.
How big of an impact have tariffs had?
We're fortunate that the vast majority of the parts we buy really do come from North America. We only have a couple of commodity areas that we have been really trying to work through with our Chinese suppliers.
What's ahead for you in 2020?
There are still a few commodities that we really need somebody who can be cost-competitive and meet the quality requirements and is based in North America.
Deb Schroeder, Toyota Motor North America
Vice president of purchasing, direct parts
Deb Schroeder has been with Toyota for 27 years, most of that time in purchasing roles. The automaker is constructing its 15th North American manufacturing plant, and it is in the midst of an expansion drive to increase U.S. investment by a third, to $13 billion. Toyota buys about $25 billion a year in North American supplier content.
Q: What are the top challenges facing Toyota on the purchasing side?
A: We need to ensure that the supplier, our designers and purchasing are all working together much earlier than we've done in the past. We want to be able to innovate before somebody already has an idea of where we should be.
What progress has Toyota made in finding suppliers to support electrification?
Toyota defines electrification as hybrid, plug-in hybrid and fuel cell for the near term. We're already in that space, we're manufacturing in North America. That's core to what we're doing. Really our focus is on that, how are we investing in that. We have a supply chain related to that.
Toyota, from a global standpoint, is also in pure electric. But when we focus on near [term], midterm, we have to make sure that we're providing what customers want. It's not easy, and it's uncertain from a regulation standpoint.
What issues will you be working on in 2020?
We're updating our new purchasing system, and that's never an easy process. The intention is that we're going to have better information sharing, easier and more efficient, between us and our suppliers so that the process isn't so arduous.
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