BMW sees supply chain as heart of the auto industry

August 3, 2018 06:01 CET

BMW has figured out something about getting ahead in the cutthroat auto industry: A satisfied supplier brings a customer innovations and new products. An unhappy supplier might take them elsewhere.

The way BMW sees it, innovation sells cars, and suppliers are key sources of that innovation.

“Without the supplier we will not be successful,” Murat Aksel, BMW Americas senior vice president of purchasing and supplier network, told Automotive News. “The supply chain is the heart of the business.”

Suppliers have corroborated Aksel’s sentiments by naming BMW the industry’s most favored parts and technology customer. The German automaker led the pack in supporting supplier innovation in the 2017 North American Suppliers’ Choice Study by Deloitte and Automotive News. Since 2009, BMW has stayed at or near the top of the biennial supplier survey.

BMW has implemented a culture of collaboration with suppliers, according to the study. BMW involves them early in product development, financially rewards innovations and builds trust, suppliers said in the study.

In particular, suppliers noted BMW’s decisiveness in adopting new technology into production vehicles and its willingness to assign internal resources to help suppliers solve problems.

Why would a buyer of new technologies behave otherwise?

Many suppliers and observers wonder the same thing.

Supplier relations directly affect auto companies’ bottom lines, says John Henke, president of Planning Perspectives, which publishes an annual survey of supplier relations with automakers. “It’s costing them hundreds of millions of dollars,” Henke says of automakers with poor supplier relations.

Henke’s studies align with the Deloitte/Automotive News reports. Both find that a supplier is more likely to go out of the way to bring new products and innovations to a customer if the customer maintains a positive working relationship.

In last year’s Deloitte/Automotive News survey, 82 percent of respondents agreed that automaker support has a significant impact on a decision to share innovations, up from 71 percent in 2015. More than half of suppliers said they would withhold their most innovative products, competitive pricing and best resources from automakers that do not support and encourage collaborative relationships.

First application

BMW has taken that message to heart.

Consider JTEKT Corp., a major Toyota Group supplier that makes about a quarter of the world’s steering systems and ranks No. 18 on the Automotive News list of the top 100 global auto suppliers.

JTEKT approached BMW with a proposal to incorporate dual-pinion steering technology into its X3 and X4 crossovers. BMW used its in-house engineering expertise and gear technology to support the effort and collaborated with JTEKT for three years to adapt the steering technology into the X3 and X4.

Dual-pinion technology is less expensive and complex than the rack-assist technology used in some crossovers. Adopting dual-pinion technology enabled BMW to lower production costs without compromising driving performance. Savings generated from such manufacturing efficiencies are reinvested in developing new technologies, Aksel said.

“We share our knowledge with suppliers,” Aksel said. “We have a lot of expertise on how to optimize parts. Our engineering team knows how a technology must be applied to create certain driving characteristics.”

BMW is no stranger to parts technology. BMW’s component-manufacturing operation, which belongs to the company’s purchasing and supplier network division, employs 9,000 people in six locations building parts including crankshafts and axle assemblies.

“We know how it is to be a component supplier. We know the challenges suppliers face, and that gives BMW a unique perspective,” Aksel said. “If a supplier struggles because of an issue, we have the technical capability to help them.”

Open to innovation

BMW outscores key competitors on decisive adoption and implementation of technology, the Suppliers’ Choice study revealed. On a 10-point scale, suppliers assigned the highest average rating of 7.4 to BMW on its willingness to involve a supplier early in innovative projects.

“The highest levels of management are involved in core innovation projects and review them regularly with suppliers,” the study noted of BMW.

BMW is viewed as a market leader in having new technologies in its vehicles, said Bill Forsythe, principal at Deloitte Consulting.

“There is a perception in the supplier community that BMW, more than its competitors, really fosters a focus on technology,” Forsythe said.

That supplier-driven innovation is on display in the 7-series sedan. In 2015, German supplier Webasto brought BMW a unique application for a panoramic roof. With light entering from the sides and reflected onto a printed graphic, the panoramic roof becomes part of the vehicle’s lighting system.

“It gives you a kind of a sky lounge effect,” Aksal said. “It contributes to a feeling of well-being.”

Innovation extends to production processes.

High moisture and cleaning agents commonly used in car washes attack anodized aluminum trim surfaces. Adequate protection was previously achieved only through an additional, time-consuming painting process.

Chinese supplier Minth Group approached BMW with a less expensive solution that integrates the initial corrosion resistance application for anodized trim surfaces into the anodizing process. Surfaces retain their sheen longer.

“If somebody comes up with an innovation that adds value and is faster, better, cheaper, we take it,” Aksel said. “If there’s innovation from a supplier, we don’t treat it as a commodity.”

For suppliers, willingness to share cutting-edge technology with automakers hinges on trust, a high priority, according to the Deloitte/Automotive News study.

Once a supplier makes the cut, BMW is committed to the relationship for the long haul, Aksel said. “When they become a supplier, then they are with us on the boat,” even in rough waters, he said.

That trust was evident after a fire in May ripped through a Meridian Magnesium Products of America factory in Eaton Rapids, Mich. The fire brought auto assembly lines around the country to a halt, affecting Ford Motor Co., General Motors, Fiat Chrysler Automobiles, Mercedes-Benz and BMW.

The Meridian factory produces instrument panel crossbeams — a structurally important part on which a vehicle’s instrument panel is mounted.

“It was not an easy part to source,” Aksel said. “We were threatened with not getting parts because machines were down, tools were broken.”

BMW moved swiftly, flying 20 employees from its Landshut, Germany, foundry where the automaker produces castings for its manufacturing plants worldwide.

Working with the supplier, the BMW foundry workers located and extracted the affected machining tools and had them transported to a different supplier — Shiloh Industries in Clarksville, Tenn. Line workers from BMW’s Spartanburg, S.C., plant help-ed get production of the affected part started in the Tennessee plant.

The in-house experience and decisive action had bottom-line consequences. BMW did not reveal how many units of vehicle production it lost, but the automaker said the total was “very low.”

“We had people who knew exactly how the tool and the equipment worked and how to set it up quickly,” Aksel said.

The cooperation BMW received was a result of trust, Aksel said. Meridian helped the automaker extract the tooling equipment from its fire-damaged site, and then Shiloh made its plant available for production.

“You don’t do that if you don’t think you’re treated well,” he said. “You don’t let people into your house you don’t trust.”

You can reach Urvaksh Karkaria at

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