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38 MITSUBISHI MOTORS CORPORATION ANNUAL REPORT 2006
Procurement
Procurement
MMC’s procurement operations have a vital mission
to accomplish in the Mitsubishi Motors Revitaliza-
tion Plan since the success of procurement activ-
ities has a significant bearing on operational
management. The company has shifted its core ap-
proach from volume-based to quality-based purchas-
ing, with the emphasis on developing strong
relationships with trading partners based on trust.
MMC aims to combine high quality with appropriate
costs by working in conjunction with trading part-
ners from the component design phase.
Four Material Cost Reduction Themes
In fiscal year 2006, the second year of the Mitsubishi
Motors Revitalization Plan, MMC established the
Material Costs Reduction Committee to increase ef-
fectiveness and transparency of materials cost re-
duction efforts in today’s tough procurement
environment. The committee is being chaired by Ex-
ecutive Vice President Kasugai. The members of this
lowering unit purchasing costs as a means of reduc-
ing materials costs. However, both unit prices and
the volume of materials required have a bearing on
material costs. For this reason, the procurement group
is actively collaborating with the production group to
make necessary improvements to reduce the volume
of material required.
The third theme is the improvement of contract-
ing methods. MMC is working to alleviate the pres-
sure created by annual price negotiations by extending
the periods of supply contracts. Through this, the
company can concentrate on VE and supporting trad-
ing partners in improving their operations. These
longer supply contracts will set three-year fixed pric-
ing levels which take into account the gains that sup-
pliers can achieve by increasing efficiency.
Finally, the fourth theme focuses on upgrading
performance improvement activities at trading
partner’s production facilities. In addition to procure-
ment staff, experts from various areas at MMC will
visit trading partner’s production facilities and work
together with partners to improve performance facility-
wide. Programs of this type were initiated at 15
suppliers during fiscal year 2005. Plans call for ex-
panding these programs to a total of 46 suppliers
during fiscal year 2006.
Support for Trading Partners From the
Mitsubishi Group
As a member of the Mitsubishi Group, MMC’s pro-
curement group has a key advantage. With the ad-
vanced technology and marketing expertise of firms
such as Mitsubishi Heavy Industries, Ltd. and
Mitsubishi Corporation, MMC is able to provide
additional support to trading partners and increase
their competitiveness. By sharing these technologies
and expertise, the company aims to strengthen pro-
curement activities.
Managing Director
In Charge of Global Procurement
Group Headquarters
Corporate General Manager of
Procurement Office
Norio Aoki
committee have been charged with overseeing the
implementation of planned cost-reduction initiatives
based on the following four specific themes.
The first theme is the reinforcement of value en-
gineering (VE) activities. To reinvigorate these ac-
tivities, in fiscal year 2006 MMC will incorporate
required costs into its budget to extend VE activities
to areas previously untouched due to evaluation ex-
penses and other factors.
The second theme is the reduction of the volume
of materials required. Traditionally, MMC focused on