BMW Manufacturing Corp. in Spartanburg County, South Carolina, produces the Z3 roadster for worldwide distribution. It was an early proponent of modular assembly through a small supply chain. Next year, the plant will use the same practice to launch a new sport-utility.
Richard Boorne, vice president of procurement for BMW Manufacturing Corp, was interviewed by Lindsay Chappell of Automotive News Europe in Nashville, Tennessee.
The industry trend is toward fewer suppliers doing more subassembly in the future. Isn't BMW already there in the USA?
We use 19 modules, supplied by just 18 suppliers. That represents some 90 percent of the components on our product. In total, we have just short of 70 component and system suppliers. The supplier industry of the future will be largely in the hands of a very small number of module integrators.
Is it a good thing that the industry will have fewer suppliers?
There are some genuine questions to be answered. One is about the protection of core competencies. A company like ours will want to be able to share our core competence with our suppliers in the future, but without making it available to all of our competitors. How will we do that?
Another question is how to manage the value chain of the future. Over the past 10 years or so, most automakers have taken their Tier 1 supply base from a couple of thousand companies down to 200-300. Now, with the advent of module integrators, it would go down to 15 or so.
But what happens at the second and third level? It potentially spreads out again. I know some companies are now questioning how they can effectively influence a supply chain made up of a lot of suppliers they previously had no relationship with.
How necessary will it be for module integrators to have technical expertise in all the various products they assemble?
Is it necessary, for example, for the console producer to also have a competence in instrumentation and airbags? Probably not.
We as automakers must define those boundaries.
This raises a further question for the future: Who owns the relationship in that value chain? In the past, when we were sourcing components, it was straightforward. The vehicle manufacturer owned it. As we move more to systems integrators, contractually, they seem to own it.
There is an evolution here. In the first phase, you might have had a core competence in manufacturing an instrument panel, for example, but you didn't have the other components that made up the assembly. In the second phase, you took on responsibility for additional noncritical componentry, like stampings and injection moldings. In the third, you're taking on responsibility for other suppliers further down the stream, like switches, valves and airbags. There will be other evolutions to come.
Where do you see the industry going?
The trend is toward smaller plants that are highly flexible to meet the requirements of customers anywhere in the world.