BMW 2005 Annual Report Download - page 34

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NAFTA region fell by one percentage point during
the same period, mainly due to the higher produc-
tion volume (and therefore higher purchase volume)
in Europe, whilst the production volume of the
BMW Spartanburg plant was down on the previous
year. Purchases in the other regions changed in line
with production volume growth and therefore re-
mained unchanged in percentage terms compared
to the previous year.
Raw material markets under strain
The high price levels on the raw material markets
were particularly important for the Group’s purchas-
ing departments in 2005. Significantly higher costs
had to be taken on board for supplies of steel and
plastic. As an example, the average price of cold-
rolled sheet steel increased by approximately 20%
compared to 2004. Industrial raw materials went
up by 12% in US dollar terms and by 13% in euro
terms. The price of non-precious metals increased
by 14% in both US dollar and euro terms. A major
development was the increase, particularly in the
final quarter 2005, in the price of energy-related raw
materials, especially crude oil, which serves as the
basis for plastics. Compared to 2004, the purchase
price of these materials increased on average by
around 36%.
In the case of precious metals (rhodium, palla-
dium, platinum), purchase price hedges held down
the impact of market price increases for the BMW
Group. As far as other raw materials were con-
cerned, measures were put in place to ensure that
additional costs were fairly spread over the entire
added-value chain, with the BMW Group also bear-
ing its share of these costs. Although purchase
price predictions carried out since the year-end
show that the commodity markets may have eased
somewhat, it is likely that high price levels will per-
sist in 2006.
Working with suppliers to improve
competitiveness
The external share of the added-value chain is
currently in the range of 70 to 80 percent; working
closely with suppliers to improve products and
processes is therefore a critical factor for success.
The BMW Group initiated a joint project with sup-
pliers back in 2004 with a view to working together
to reduce product costs. This initiative was expand-
ed in 2005 and now incorporates measures to im-
prove the reliability of bought-in components and
systems.
By considering all potential opportunities along
the whole chain from the procurement market
through to the dealer, the aim is to reduce costs of
the current models, whilst at the same time improv-
ing field quality after vehicles have been delivered
to customers. Insights gained in this way subse-
quently flow into the development of new vehicles.
New supplier management system
The objective of the “Management of Partner Net-
works” project was to extract full benefit from the
innovative strength of the procurement market; the
“New Supplier Management” project was launched
at the beginning of 2005 in order to complement
this project.
The focus is on optimising internal processes
within the BMW Group at the crucial interfaces
between development, purchasing, production and
sales. By adopting concurrent engineering methods
Regional mix of BMW Group purchase volumes 2005
in %, basis: production material
Germany
Rest of Western Europe
NAFTA
Central and Eastern Europe
Africa
Asia/Australia
South America 9
12
3
2
2
20
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