Wilhelm Becker is responsible for BMW group purchasing. He supervises a staff of 700 around the world.
BMW spent about DM27 billion ($15.2 billion) in 1997 on production parts. That included DM18 billion for BMW and DM9 billion at Rover. Becker was interviewed in Munich by reporter Edmund Chew.
How is BMW purchasing coordinated with Rover?
It has never been our goal to integrate Rover into the BMW organization. We have to keep BMW and Rover independent and still realize synergies. We have a group purchasing steering function whose job is to coordinate purchasing activities between Rover and BMW.
On both sides the structure has changed so that Rover purchasing managers now have direct communication with a counterpart here in Munich. Now we come together every month to build strategies and talk about important purchasing decisions. This structure is new, the last part came into place in August 1997.
What are the results?
Mainly in new contracts. Changing the current product is very difficult. To have a common part such as a radio you need to redevelop each part, and that costs much more time and money than to keep it until a product change. For new projects, like the new four-cylinder engine, a lot of common parts are possible.
We are working together as much as possible as long as it doesn't touch the brand identity. We have to select parts that the customer doesn't see.
Will you have 60 percent commonality like Volkswagen group brands?
We won't achieve such a high percentage because we have different car concepts. BMW is rear-wheel drive and Rover is front-wheel drive. The exhausts, for example, are very different.
Maybe the silencer could be the same, but the tubes between the silencer and the engine have to be different. Shock absorbers have to be different because they are formulated for the car concept.
On the other hand, fuel tank gauges and the fuel pump will be almost the same. And by using common materials the costs for testing can be substantially reduced. A specification is valid for the whole group.
How much overlap is there between the supplier bases of Rover and BMW?
We started with 20 or 25. We now have 150 common suppliers and we are going to increase that number. I think it will double, although I am not able to say today whether it will be 300 or 400.
When will this happen?
In the next five to six years. With each new program we make further steps.
How many suppliers do you have in total?
Rover has 600, BMW a little more than 900 supplier locations, not suppliers. There are a little over 600 companies supplying BMW. For instance, TRW is worldwide and we get parts from a lot of addresses.
Is the number of direct suppliers still falling?
We have fewer suppliers because there is a substantial reduction in the number of parts. For example, seats. In the past seats had 130 parts. Today it is a maximum of 25. We are creating more and more modules and we only have one supplier delivering each module.
Is this a threat to your German Mittelstand suppliers?
Our goal is to have world-class suppliers worldwide, and also to promote and to support medium-sized Mittelstand companies to avoid losing control of innovation and technology.
We see a big opportunity for medium-sized companies to create partnerships. These companies have to put together their knowledge and experience in development or production agreements to compete against the big mega-suppliers. These companies can be very flexible. They don't have big administrations or long decision paths. And we can be sure that when they work on special projects the technology won't appear on a competitor's car tomorrow.
How far is modularization going?
I think we are seeing a continuation of the process that we started in 1988. The new 3 series is 50 percent modular, by value. It's an optimization that reflects all the experience we have had with the 5 and the 7 series. Modularization means you can have fewer interfaces, that is very important for us.
And there are big improvements in quality. In the past we had to handle thousands of part numbers and the risk of making an error was much higher than if you get a modularized part that is tested and ready for assembly.
How far can you go with modularization?
There are no rigid rules. It makes much more sense to modularize cars with lower volume than cars with high volume, like the 3 series. The highest level of modularization is the Z3.
How much do you single-source?
Eighty percent is single sourcing. In many cases we cannot afford two sets of tools. There are a lot of variants at BMW, so that the true volume of parts is very low. For example, with the 3 series we have a sedan, coupe, a touring, a convertible and a compact. We have some parts with an annual volume of less than 50,000.