This is the final installment of a Ward’s 7-part series stemming from interviews with the purchasing departments of GM,, , Toyota, and Nissan.
Early supplier involvement in a vehicle program is commonly accepted in the auto industry as a good thing.
It allows a supplier time to develop the ideal solution for an OEM’s particular needs, and the auto maker can avoid expensive and unnecessary design changes as production nears.
Japanese auto makers generally are good practitioners of the concept, butNorth America Inc. knows it can do better.
“We always talk about early supplier involvement. No one’s against it, but we don’t practice it as well as we can,” John Miller, vice president-purchasing, tells Ward’s. “Asking a supplier to come in early and then giving them our specs isn’t really supplier involvement.”
Instead of telling the supplier what to build, Miller wants a model that encourages open dialogue and allows parts makers to come forth with ideasproduct planners hadn’t considered.
Miller says NNA struck gold recently with an ambitious new approach to early supplier involvement, and he looks forward to using the same model in the future.
Miller was talking to James Kamsickas, president and CEO of International Automotive Components Group North America, a candidate to supply significant interior content for Nissan’s first light-commercial vehicle, which launches in first-half 2010 at Nissan’s Canton, MS, plant. The same facility will launch two other LCVs later.
was eager to join the program as early as possible, so Miller made a suggestion.
“We decided that I would bring the (Nissan) engineering people, product planning and purchasing (groups). I told him, ‘We’ll come to your engineering center. You show us what early supplier involvement would be like. Give us a good example of it.’”
The Nissan crew was thoroughly impressed with the homeworkhad done to prepare for the meeting. The supplier had benchmarked Nissan’s specifications for its LCV vs. competitive vehicles.
“They showed us areas where we could change our design or change our spec and save money,” Miller says. “They showed us logistics ideas, how we would deliver parts.”
With the right people assembled in the same place from both companies, it didn’t take long for the meeting to bear fruit.
“Within four hours of walking around in a big display area and looking at the vehicles and touching the parts, we could convince product planning, styling and engineering. And we approved these ideas on the spot,” Miller says.
The meeting with IAC was a success because the supplier “could meet our cost target by reducing the cost, not just by reducing the price. That’s why I’m so much more excited about those types of activities, rather than just, ‘send me your ideas for lowering the price.’”
Similar activities are moving forward with other suppliers as well.
“This is just one good example,” Miller says. “We did the same thing with the seats. We are starting with the major commodities that drive the most complexity and cost into the vehicles. We will systematically be going down the value chain.”
In another bid to improve efficiency, NNA has targeted the sequencing of parts for vehicle assembly plants. For years, Nissan relied on suppliers to sequence parts based on the auto maker’s broadcast order, but Nissan also wanted the flexibility to change the broadcast internally.
“Over time, what happened was we were sequencing once at the supplier and then re-sequencing them at the plant,” Miller says. “We had double the headcount dedicated to sequencing the parts.”
So NNA has taken the sequencing work in-house. “That saves $1 million a year, and it hurt nobody,” Miller says. “Those are the types of things that we’re more aggressively searching out.”
Meanwhile, Nissan Motor Co. Ltd. CEO Carlos Ghosn has outlined a new 5-year business plan, Nissan GT 2012, designed to challenge all aspects of material costs and pursue sourcing of components from Leading Competitive Countries (LCC) more aggressively. Suppliers factor heavily into the initiative.
Ghosn says he expects more increases in raw-material prices. “Since our industry has difficulty passing raw-material price increases to consumers, additional cost-reduction efforts are needed to offset them,” he says.
Nissan suppliers can expect parts volumes to double, on average, over the next five years due to volume increases from business expansions, reductions in part complexity and an increase in sourcing for the-Nissan Alliance, Ghosn says.
Nissan aims for more than 90% localization of parts for new vehicles built in LCC markets. That includes the new A-platform vehicle Nissan will launch in the U.S. in 2010.
Also on the product front, a recently signed partnership has Nissan producing future small cars forLLC in 2010, while Chrysler will manufacture fullsize pickups for Nissan beginning in 2011.
Miller says Nissan will oversee purchasing for the small-car program, while Chrysler will manage procurement for the trucks.