BMW 2008 Annual Report Download - page 38

39 Group Management Report
Creating efficient value-added chains
The BMW Group’s Purchasing and Supplier Network was
driven in  by the desire to achieve sustainable
improve-
ments along the valued added chain in the areas of quality,
innovation, compliance with deadlines and cost. The focus
of activities was on reducing production costs whilst im-
proving quality. Despite worsening market conditions during
the second half of the year, the BMW Group was able, to-
gether with its suppliers, to achieve the challenging cost
and quality targets that had been set, both for ongoing se-
ries products and development projects.
High volatility on raw materials markets
The price levels of all major raw materials and supplies
needed for car production rose again sharply during the
first half of  as compared to , creating additional
pressure along the whole of the value-added chain. Costs
rose substantially, particularly for steel and aluminium as
well as for precious metals such as platinum, palladium
and rhodium. Hedges already in place for precious metals
helped to cushion the immediate impact for the BMW
Group. During the second half of the year, the BMW Group
took advantage of falling prices to conclude new contracts
with medium and long-term price hedges for the coming
years.
The BMW Group is responding to the increasing signifi-
cance
and complexity of raw materials procurement by
centralising its raw materials management. This will allow
it to react even more swiftly and efficiently to price fluctu-
ations on raw materials markets in the future. Bundling
purchase volumes creates additional synergies in the area
of requirements forecasting, whilst also having a positive
impact on pricing structures.
Natural hedging potential fully used
Purchasing production materials, goods for resale, services
and investment goods in the currencies of the sales mar-
kets in which the BMW Group operates helps to reduce
exchange rate exposures. Careful consideration is given
when selecting suppliers so that the natural hedging
potential is taken full advantage of in the NAFTA region,
China and Japan. Selections are made jointly with the in-
ternational purchasing network.
The course has already been set for a significant increase
in foreign currency purchases for the BMW X3 successor
and successor models of the current BMW 3 Series. By the
same token, favourable cost factors can also be exploited
in the relevant procurement markets.
Exploiting internal and external efficiency
synergies
The BMW Group continued to work closely with its
sup-
pliers in . Interdisciplinary teams from development,
purchasing, production and quality management came
together with suppliers to analyse potential opportunities
to reduce costs and improve quality along the entire value-
added chain. In addition to productivity improvements,
the main emphasis was on generating benefits which are
relevant
for customers and which can be applied across
all
models.
Initiatives were also taken to raise productivity by using
common technologies for component production.
Analyses
of existing systems and processes resulted in
significant
reductions in the use of space, inventory
volumes and throughput times for products. At the same
time, quality was improved and costs reduced.
Sustainable development and production
processes in the supplier network
The application of high ecological and social standards
and compliance with strict environmental protection
requirements are regarded by the BMW Group as ex-
tremely important criteria for its suppliers. As part of
the process of nominating suppliers, the BMW Group
takes care to ensure that the companies involved ad-
here to internationally recognised standards of sustain-
ability.
Regional mix of BMW Group purchase volumes 
in %, basis: production material
Germany 45
Central and Eastern Europe 1 2
Rest of Western Europe 21 Asia / Australia 6
NAFTA 13 Africa 3
Germany
Central and
Eastern Europe
Rest of Western Europe
NAFTA
Asia / Australia Africa