DaimlerChrysler Corp. is closing in on its goal of $3 billion/year in annual savings by 2003 — and the potential to eliminate waste from the lower tiers of the supply chain has never been better.
SCORE (Supplier Cost Reduction Effort) resulted in savings of $2.2 billion in 1999 with a target of $2.4 billion this year, says Thomas Sidlik, executive vice president,procurement and supply.
Mr. Sidlik earlier told Ward's SCORE's goal was to save $3 billion annually by 2003 (see Ward's Automotive Reports — Nov. 23, '98 p.1). It was an ambitious figure given the 1998 forecast of $1.2 billion and those who said there wasn't much left to wring out of the supplier partnerships forged under's extended enterprise system.
But SCORE, which rewards suppliers for meeting cost targets with a percentage of the savings, has become self-sustaining. As more suppliers “get it,” more participate, says Mr. Sidlik.
“And when we go electronic, it's even going to be better, because the Nth tier will get it, they will say, ‘wait a minute, I can take waste out, and I'll give DaimlerChrysler part of the price reduction cost reduction and I'll take some too.”’
Roughly 90% of the savings are coming from Tier 1 suppliers, largely because the view becomes obscured after that. Web-based exchange will make the chain more transparent and is a far cheaper means of tracing a flow chart of materials to find out who buys what from where.
Production plans can be shared past the first tier, enabling suppliers to adjust inventory with certainty, reduce waste and free up cash otherwise pooled for contingencies.
Advantages also include the ability to implement quality and product development standards chain-wide, and electronically fix processes.
As for the continued integration of the Chrysler and-Benz supply chains, Mr. Sidlik says while they share surprisingly few parts, their supply base at the first tier level is surprisingly common. “You go down the top five suppliers and they are basically the same.”