Power Buyers: Secrets of the World's Best Automotive Purchasing and Supply Managers How world-class purchasing and supply management
业余拳击
practices can cut costs and capture value for today's
advertisingautomotive supplier industry.
by Rusll Hensley
Can auto suppliers survive the next 10 years? Not if they continue to give up 2 to 4 percent in price each year, while reducing their own costs at just over 3 percent (nearly 30 percent below their 2006 target levels). That's the sobering news from the 2006 Purchasing and Supply Management (PSM) survey and analysis undertaken by the Original Equipment Suppliers Association (OESA) and McKiny & Company. Price pressure will clearly remain a fact of life among tier-1 auto suppliers that must improve their own purchasing-related cost reductions and efficiencies in the coming years to remain viable. An update of the 2002 survey, the 2006 results paint a somewhat somber picture of the challenges facing the global automotive supplier industry, which continues to miss its cost-reduction aspirations. The rearch identifies ven key reasons for this shortfall:
1) Image problems: The survey indicates that the industry's view of purchasing as a strategic function is eroding (Exhibit 1). While nearly 80 percent of suppliers' nior managers viewed purchasing strategically in 2002, that percentage dropped to half by 2006. Perhaps a by-product of this loss of top management share of mind, purchasing today has an image problem within many suppliers, with far fewer respondents indicating that the purchasing function attracts top talent compared to the previous study. In addition, fewer people today view a job in purchasing as a stepping stone to bigger things compared to in 2002.
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Exhibit 1:
2) Mindt and behavior: Cross-functional collaboration efforts are often stymied by an internal lack of trust or mutual respect. McKiny's survey revealed that fully 70 percent of respondents said their
companies don't consistently role model collaboration at the highest levels of the organization – a practice that can nd a strong message regarding expected behavior. Furthermore, supplier mindts toward their own suppliers tend to be quite narrow, with most indicating that they rarely involve their own suppliers in areas such as concept/design activities or joint cost-reduction exercis.
3) Total cost approach: Most of the supplier industry fails to apply total cost of ownership (TCO) thinking to purchasing decisions. Instead, purchasing choices often appear to be bad upon price alone. And while the availability of spend data continues to improve, over half of survey respondents indicated that they still lack the basic facts needed to make informed purchasing decisions. Supplier knowledge of their own vendors' capabilities has incread significantly since 2002, but somewhat paradoxically, buyers know less about the cost structures of their suppliers (Exhibit 2).
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Exhibit 2:
4) Direct and indirect materials: McKiny's survey reveals that while suppliers do put appropriate mechanisms and process in place for direct materials, their ability to execute is often lacking. For
example, while suppliers establish cross-functional commodity teams, few such teams are able to conduct clean-sheet cost buildups. Furthermore, many suppliers don't even have the basics in place regarding indirect materials – a situation unchanged from the 2002 survey.
5) Global sourcing: Suppliers must pursue many of the paths that their OEM customers have pioneered to reduce costs and capture value, including global sourcing. The survey shows that offshoring can significantly boost supplier cost positions. For example, it currently allows suppliers to capture average savings of 9.3 percent in electronics, 10.6 percent in machining, 11.8 percent in castings, and 13.2 percent in tooling. Such results have stimulated auto suppliers to accelerate their purchas from low-cost countries. Within the North American industry, for example, spending outside of the region – already at 33 percent in 2005 – is t to expand by nearly 20 percent by 2008. Globally, the survey indicates that sourcing from North America, Japan, and western Europe will continue to decline, while sourcing from eastern Europe and Asia will accelerate rapidly. However, there is a marked difference in the levels of such outsourcing that takes place among cost leaders and followers – an indication of how important this factor can be to economic success.
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奇怪造句6) Integration with product development: While the survey results show that purchasing is involved in the product life cycle, it tends to do so only after the majority of critical cost-control decisions have been made. For instance, purchasing usually becomes involved in the beginning of the product development stage, after all the decisions during the concept and design phas have been made. Furthermore, over 60 percent of purchasing resources are, on average, deployed against products already in production, where opportunities to reduce costs are relatively limited. Less than 40 percent are focud on products that are still being designed, at point at which the greatest cost impact by far can be achieved. McKiny also found that most suppliers over-emphasize historical costs when undertaking target-costing exercis and that only about one-third look to the market to t targets. Wor yet, the inability to execute well means that actual costs exceed targets about one-third of the time.
按语7) Supplier relationships: The 2006 survey shows some backsliding compared to 2002 regarding the industry's recognition that collaboration with vendors can be critical to achieving goals. Today, fewer companies conduct regular workshops with their own suppliers or ek innovative ideas from them. And, the collaboration that does occur usually focus on product delivery and scheduling, rather than on strategic elements such as early-stage product design or improving internal manufacturing productivity. On the positive side, suppliers do continue to pursue long-term relationships.
WHAT SEPARATES STRONG AND WEAK PERFORMERS?
To measure the purchasing performance of individual suppliers, McKiny developed a purchasing index and scorecard. A gmentation of weak, average, and strong performers was conducted bad upon the relative performance of each gment in terms of the reasons described above (Exhibit 3).
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Exhibit 3:
McKiny then distilled the factors that tend to drive strong performance for each of the ven areas. The analysis reveals the key reasons why strong performers readily overcome the challenges in each area:
1) To attract the best people, strong performers make purchasing more
attractive to top talent. The companies often feature many key leaders
who have worked in purchasing and thus, view talent management as
critical to effective purchasing. At the organizations, purchasing is a magnet for high-potential employees.芝麻酱凉面
2) Strong performers deploy a far higher proportion of their purchasing
resources on strategic activities, such as developing sourcing strategies. In fact, strong performers spend two to three times more resources in the areas compared to weak players, while weak performers spend four times as much time on routine tactical activities.
3) Compared to the industry average, over twice as many strong performers
恋爱大过天create comprehensive "spend" databas to capture relevant information by category. In fact, every strong performer surveyed relied
upon such a databa. Furthermore, all of the companies strive to cultivate a deep understanding of their suppliers' capabilities.
4) Strong purchasing performers employ clear global sourcing strategies,
电影致青春better understand total supply chain costs, and put effective risk strategies McKiny & Company Automotive & Asmbly Extranet
in place. As a conquence, they purcha nearly 90 percent more of their
requirements from offshore sources compared to weak performers. The rearch indicates that they will maintain this advantage going forward and
thus, maintain their competitive cost advantages.
5) Purchasing becomes involved in the earliest stages of product
development (i.e., during the concept pha), while average and weak performers typically wait much longer. Strong performers can thus influence a far greater proportion of the costs by involving purchasing earlier. McKiny's analysis further shows that strong performers could benefit from even earlier involvement.
6) Strong performers t market-bad targets and conduct root cau
analys over five times as often as weak suppliers. Strong performers also maintain much more robust libraries of cost benchmarks and therefore, are better able to t reliable targets. The survey shows that they are able to meet or surpass their targets almost one-third more often
than average suppliers.
7) Virtually every strong supplier develops long-term, performance-bad
collaborative supplier relationships. Strong performers consistently track quality, cost, and delivery performance and they also measure
supplier innovation and financial performance, creating a holistic picture of their vendors' performance.
The automotive supply ba faces extreme competitive and structural pressures that have already forced veral key industry players into bankruptcy. In the face of – and to an extent, becau of – the pressures, this latest survey reveals that the industry hasn't moved forward in terms of purchasing performance. Becau strong purchasing performance can make the difference between bottom-line success and failure, the results show that this lever is too important to be ignored. Furthermore, many of the root caus of current performance deal with fixing the basics, such as improving the profile of purchasing, adopting a total cost mindt, and employing an advantaged fact ba. While some companies effectively u best practices, more need to move in this direction. Finally, even the best companies in the industry have room for improvement.己欲立而立人
If you have any questions regarding this document, plea contact:
Rusll Hensley
E-mail: Rusll_
Phone: +1 (313) 202-5389
Copyright © 2007 McKiny & Company, Inc.
All rights rerved.
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