Fiat will ask its suppliers to help develop more modules and systems, said Tommaso Le Pera, senior vice president of purchasing at fiat Auto since July 1998.
About 40 percent of the value of the next Bravo/Brava will be in modules, he said. That compares with 20 percent on the new Punto.
Fiat had a purchase volume for direct production parts of about L22 trillion (euro 11.4 billion, $11.9 billion) in 1998, and will buy a similar amount in 1999. Globally, Fiat employs almost 900 people in its purchasing department in 10 countries.
Prior joining the purchasing department, Le Pera was director of logistics at Fiat from 1991-1995. He was then sales and marketing director for the Italian market until July 1998. He was interviewed by Automotive News Europe's Edmund Chew.
How are your supplier numbers developing?
In the past five years, we have selected our supplier base. In Europe we moved from 750 to 350 suppliers. We think that this number will remain quite stable. Globally, we are at about 820 suppliers, and we expect to be not higher than 700 by the middle of the next decade.
Are you doing more single sourcing?
For every part number we have only one supplier. For every commodity we have two or three suppliers.
Is your level of outsourcing increasing?
Yes, we have an ambitious program for outsourcing, both for direct materials and for services. We are completely outsourcing our material handling, our robot servicing, and our maintenance. We are also outsourcing more direct materials, mainly in modules. Currently, 70 percent of direct materials are outsourced, but that will move toward 80 percent.
Which modules will you be developing?
Cockpit, front end, rear suspension, corner, bumpers - each car will have about 10 modules. We will start with the rear suspension, cockpit and door modules. On the new Punto, the level will be about 20 percent, but on the new Bravo/Brava, about 40 percent of the value of the car will be in modules.
Why are you doing more modules?
There are two main reasons. The first is that we are focusing our activities on the core competencies. Through a policy of strong partnership we want to increase the level of product integration and assembly outsourced to our suppliers. The second reason is that we believe that the integration of components into a module from the early stage of the product development can be very competitive in terms of value for the customer and cost competitiveness.
Will your module or systems suppliers choose the Tier 2 suppliers?
As a first step, for a few years we will share the choice of suppliers of the main components. When the module suppliers have enhanced their capabilities in product integration and full competence in technology, they will have full responsibilities on all components, related suppliers and performance/cost competitiveness.
Systems are also important. We have selected 13 different car systems, such as electrical distribution and safety. We are working closely with our suppliers in order to shift from the co-design of single components to the co-design of whole systems.
Modules are a bigger task than components. What kinds of things are you looking for from suppliers?
We have a sophisticated 14-point check list of technical/performance parameters for choosing co-design suppliers. Some items are very important for module suppliers, such as design capability, technological know-how, quality level and the financial health of the suppliers.
What other criteria are important when you evaluate your suppliers?
Globalization is very important for us. The other main challenges are innovation capability, quality level, and cost competitiveness. We are looking for suppliers to take an active role in generating proposals for cost reduction and product improvement. One of their roles is to push for new solutions and for changes in our specifications, based on their detailed knowledge of the component world.
They also have to participate in our component development platform, where we test research and development. For every car there is a product platform team that is in charge of the car's development. The component platform is across every module and works two years ahead of the car platforms, and therefore about four years before production. On this platform we have representatives of our production, design and manufacturing engineering functions, and suppliers.
How do you select the suppliers on the component development platform for the production models?
We have several stages: the idea, the concept, the development and the application. We start with a lot of suppliers, but only one will be selected for the development phase on a new model.
Have you changed your organization at all to achieve these new goals?
We are changing two things. The first is the skills of our staff. We are employing only engineers. The second is how they work together. We have created product line teams. We are putting together all the experts from all Fiat departments for a product line like air conditioning.
When did you do this?
We started in January with one-third of the cost base. We formed 10 teams in January with about 100 people. In April it doubled with another 10 teams and covering about 50 percent of the costs of direct materials. We are trying to reach 90 percent at the end of this year.