Weekly News Review | 8 May 2017 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

Keeping suppliers sustainable

Writing about business activities and supplier relations at Audi recently, I was particularly impressed by one of the carmaker's initiatives: a ratings system that is intended to check the sustainability of a supplier’s operations before the OEM places an order, or even sends a vendor an RFQ.

Audi decided to introduce these sustainability ratings last month (April 2017) so that in the future orders will only be placed with suppliers that have won and maintained a positive rating. The ratings are based on checks carried out at the suppliers’ production plants as well as on self-disclosure by the vendor.

The German carmaker has said that it is in favour of car manufacturers and suppliers in the medium term developing a unified standard for on-the-spot audits, which would be valid for the entire industry. A common standard would enhance efficiency for all parties and would also be effective in ensuring sustainability along the entire value chain. For example, a shared standard would prevent a supplier from being audited several times by various manufacturers, and suppliers could carry out the standard audit with their sub-suppliers.

This is a far cry from the ‘bad old days’ or Lopez era as some commentators called it - a time when cost was the primary deciding factor for RFQs submitted by the whole VW Group.

Over the years, I have heard purchasing directors slowly moving down the list of cost, quality, delivery, innovation and process robustness, when I ask them what order they rank these qualities in when deciding on a vendor. Whereas in the 1990s a procurement manager might have insisted on the best price for a component, within the parameters set by his company’s engineering teams of course, the list has slowly changed to bring quality towards the top.

As time went on, I would hear about the importance of process robustness, and how OEMs (and tier ones with their own supply chain) would send in engineers to inspect and help suppliers improve and maintain an efficient and consistent manufacturing process. With its accent on sustainability, I think Audi have arrived at a mature and ‘holistic’ approach.

A sustainable business, one that has a predictable (as much as one can predict the future in the automotive business) and carefully planned and managed investment and growth strategy, is surely the model that best assures its customers of continuity of the supply of high quality and well-priced components and systems.

Simon Duval Smith

Simon Duval Smith - Editor-at-Large

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