Is e-commerce the answer? It's not that simple, says Bruno Dehler, manager of supplier support and purchasing strategy for BMW of North America Inc. in Woodcliff Lake, N.J. The longtime purchasing executive for BMW of North America and Volkswagen AG of Wolfsburg, Germany, says automakers need to address some manufacturing basics before relying on e-commerce to cut costs. Automakers also should get their cost-cutting act together before they make demands on suppliers, he said. Dehler spoke recently with Gail Kachadourian, a staff reporter with one of Plastics News' sister publications, Automotive News. Edited excerpts follow.
Q. How much of an impact will e-commerce have on cutting the cost of a vehicle?
A. I am not convinced of the reports saying that e-commerce will cut $2,000-$3,000 out of the cost of a vehicle, but it will have a marked impact on the cost, depending on how you use it. I think $2,000 or $3,000 is a little too much. Just like the big boys in Detroit, we [at BMW] are at a learning stage with e-commerce right now. We have to define what functions e-commerce is going to include and if it will be enough for suppliers to commit that they want to participate.
Q. What should automakers do to get the most out of using e-commerce?
I think it's more important that car companies get their processes together. Then, when they are lean, they can concentrate more on e-commerce. I am not convinced that all the savings are going to come out of e-commerce. Car companies should make sure their assembly processes are as lean as possible and cut down on subsidiary suppliers first.
We need to be leaner and look inside our own processes and see where the savings are. The automakers are not with it. They are saying that only suppliers have to cut costs. I don't think so. The suppliers notice that the automakers are also creating waste. Automakers have to make sure they are lean first.
Q. How do the purchasing tactics of North American automakers and European automakers differ?
A. In Europe, procurement is more national. There are language barriers, and different countries focus on different features. It's harder for the Europeans to find savings. Traditionally, each country's automakers have had their own suppliers. However, BMW does have multinational suppliers. If the right supplier is out of France or Italy, we still buy from them.
Our countries are putting out different cars with different emissions standards. Because of this, a separate European e-commerce exchange is logical. I don't think you can do "Newco" [the online exchange formed by Ford Motor Co., DaimlerChrysler AG and General Motors Corp., now formally named Covisint] in Europe in the same way as in North America.
Q. How will Europeans change their purchasing methods in the future?
A. They are going to be much more like the North American style of purchasing, because we have a common currency now in Europe, and we have more companies that are offering their products throughout Europe. There is a chance that over time, European automakers will start to use more and more North American suppliers through e-commerce, especially since e-commerce is starting in North America.
Q. What is BMW's primary method for cost cutting?
A. We have a program called COMPETE (Continuous Management Program for Efficiency and Technical Excellence), in which supplier support teams spend time with the suppliers to see what processes they can optimize and thus save money on. A lot of the cost-cutting efforts are still focused on cleaning up the manufacturing process, since the e-commerce for production parts has not really started yet in Europe, except for machinery equipment. Cost-cutting efforts could possibly include more e-commerce in the next year, but it depends on how e-commerce will develop.
Q. Why did BMW in April decide to create its own commodity exchange instead of joining the exchange Ford, DaimlerChrysler and General Motors had set up?
A. We don't want to copy everything being done in America. The people who are setting up these purchasing structures have to figure out what is going to be similar to North American purchasing practices and what is going to be specific to European purchasing. There is going to be some kind of harmonization between European manufacturers.
Q. How do you think e-commerce will affect your relationships with suppliers?
A. How much of their portfolio are they going to offer online if the exchanges expand to include technology? If they are going to show as much as 20 percent of their portfolios through e-commerce, then we will look into using e-commerce very carefully. How do you judge technical excellence in e-commerce? It is very subjective. Suppliers will hold back on e-commerce and go to individual high-end customers. Eventually, they will put their latest technologies on the Web. Suppliers want to differentiate themselves with the customer that is of value.
Q. What is the biggest mistake that automakers are making in their cost-cutting efforts?
A. I think some companies are using an intimidating approach, saying that "you've got to come up with this number [of cost savings], or you will lose this contract." I don't think that is the right way. Supplier relationships today are built long term. For the past three or four years, BMW's purchasing orders have been for the life of the vehicle. In this case, automakers have to trust their partners so they can help make them leaner and better before forcing them to use e-commerce.