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BMW increases focus on supply risk 

Posted on Wednesday, March 25 by Registered CommenterDavid Rae in , , | Comments3 Comments

German automotive giant BMW has increased the number of staff dedicated to assessing the risks of failure within its components supply chain.

Nothing new there, perhaps. But BMW has the bitter lesson of history to force its hand, having already had its fingers burned by supplier problems.

As this article in the UK's Financial Times reports, when Edscha, a German manufacturer of sun roofs, door hinges and other car components, went to the wall last month BMW was caught short. It was about to go to market with its new Z4 convertible, but Edscha was the only supplier suppying its roof. "We had no choice to go to another supplier, as that would have taken six months and we don't have that. We had to help Edscha and try and stabilise it," BMW told the FT.

Perhaps such drastic, last-minute rescues are a thing of the past now that it is ramping up its supplier risk efforts...

The FT article above goes on to list how companies can assess the risk of supply failure and one word of advice which seems ludicrously simple and should go with out saying was, "talk to them". At a time when relationships may well be strained to breaking point due to price tensions, this might not be as straightforward as it sounds.

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Reader Comments (3)

Supplier Risk Management has now become a top priority in all OEMs and specially in Auto Industry. Even US government understood the fact that Tier 1 and Tier 2 supplier are struggling alot with $5Billion bailout for them. It is very urgent for everybody to analyse viability of their key supplier in this troubled time.
March 25, 2009 | Unregistered CommenterNaveen Rawat
Supply Risk as a whole has been around for many years primarily as a part of commodity sourcing strategies run by CPOs in most organizations. In today's economic reality those companies that have effectively balanced sourcing strategies - optimizing cost of procurement with supply risk [have 3-5 key vendors accredited and capable of supplying 60-70% of the comapnies demand with little ramp-up versus consolidate 100% spend with one vendor to minimize procurement cost] will face lower overall risk.

As always over-optimized supply chains with cost reduction as the only focus will also have the highest risk of failure...

The attached url leads to a detailed blog on how to think about Supply risk and what other factors to consider as you try and de-risk your supply chain.

http://www.infosysblogs.com/supply-chain/2009/03/supply_risk_increasing_importa.html#more
March 31, 2009 | Unregistered CommenterSaurabh Agrawal
The vulnerability of the vehicle OEMs due to their over-dependence on suppliers is immense. Gone are the ways of keiretsu-system of single-supplier reliability, a-la Toyota. In this economic downturn where the OEMs are under pressure of shrinking credit and market share, BMWs case can be taken as an exception. Instead of magnanimously parting with their limited capital to help supplier’s tide over the crisis, a more resolved and affirmative decision of OEMs would be to sense danger in advance. BMWs plan to collaborate with Daimler in procurement, is a more pragmatic step.

In fact vehicle OEMs should identify other OEMs with similar product-platform strategies, and attempt to forge tie-ups for collaboration in procurement space. Such Collaborative procurement platforms (CPPs) bring about visibility in a supplier’s financial and operational viability, as well as serve to cash-in on procurement synergies. The CPP enables OEMs to share supplier info with other like-minded OEMs to eliminate the concerns of “anonymity of supply chain”.

Dear David, I invite you to my blog on procurement platforms to hedge risks. The link is given below:
http://www.infosysblogs.com/supply-chain/2009/04/does_the_procurement_boardroom.html#more

The link to this the BMW-Daimler alliance is given below: http://www.procurementleaders.com/news/latestnews/german-giants-collaborate/?version=1
April 14, 2009 | Unregistered CommenterSudripto De

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