BMW 2007 Annual Report Download - page 39

37
New purchasing and supplier network
corporate division
As part of its strategic realignment and in the light of
the ever-increasing complexity of the supplier chain
structure, the BMW Group created a new Purchas-
ing and Supplier Network corporate division with
effect from 1 October 2007. In addition to purchas-
ing, the following functions have been assigned to
the division: quality management of parts, logistics,
vehicle components and systems. This new division
has been charged with the task of achieving even
further improvements in the areas of quality, supplier
loyalty and costs. This will involve keeping the num-
ber of system interfaces to a minimum and opti-
mising processes right from the raw material stage
through to the finished product.
Purchase volume increased in Central and
Eastern Europe
The BMW Group’s purchase volume went up in
2007 in line with the expansion of production activi-
ties. Increased global sourcing activities as well as
the successful implementation of a quality and cost
initiative resulted in an increase in the volume of
purchases sourced in Central and Eastern Europe.
The purchase volume in Western Europe also in-
creased, reflecting increased production of the
MINI. The purchase volume in the NAFTA region
was also up, due to the first full year of production
of the new BMW X5 at the Spartanburg plant in the
USA. The volume of purchases sourced in South
America fell sharply due to the fact that the engine
cooperation arrangements with TRITEC are wound
down.
The proportion of production material purchases
sourced in Germany was down in percentage terms
and accounted for approximately one half of mate rial
procurements. In the remaining regions, volumes in-
creased in line with production growth. The ratio of
material procurements to the total purchase volume
remained practically unchanged.
Situation on the commodity markets
remains tense
The high price levels on the raw material markets
once again represented a major challenge for the
Group’s purchasing departments in 2007. The addi-
tional costs were spread over the entire value-added
chain with the BMW Group also bearing its share.
Compared to the previous year, the average market
prices of steel and plastics were up by 10 % and 6 %
respectively in 2007. By contrast, the price of alu-
minium fell by 5 % and that of copper by 1 %.
Overall, the prices of industrial raw materials,
non-ferrous metals and energy raw materials in-
creased by 7 %, 4 % and 2 % respectively in 2007.
Compared to the previous year, the prices of pre-
cious metals relevant for the BMW Group went up
in 2007 by rates of between 11 % and 35 %. In the
case of precious metals (rhodium, palladium, plati-
num), purchase price hedges reduced the impact of
sharp market price rises for the BMW Group.
Close cooperation with suppliers strengthens
competitiveness
Given the high share of suppliers in the value-added,
cooperating closely with them represents a major
factor in improving products and processes. The
BMW Group is involving its large system suppliers
from the very initial stage of a development project
even more intensively. Joint analyses are carried out
to identify potential areas where efficiency can be
improved and development and manufacturing costs
reduced. Any solutions that these joint teams come
up with are taken into account in current and future
development projects.
Further investigations are made along the entire
value-added chain to identify potential ways of
achieving further product and/or process improve-
ments. Ensuring that close networks are in place
between internal and external partners has an impor-
tant role to play here. Increasing the transparency
of activities with suppliers is also seen as being vital
for the BMW Group.
One of the main objectives of supplier manage-
ment is to raise the quality of bought-in material.
Suppliers to the Group are increasingly taking over
responsibility in this respect. As part of the process
of managing supplier performance and expertise,
Regional mix of BMW Group purchase volumes 2007
in %, basis: production material
Germany
Rest of Western Europe
Central and Eastern Europe
NAFTA
Asia/Australia
Africa
10
11
32
21
53