Putting all the parts in one box
Fiat is in the process of integrating the purchasing function of all its sectors around the world.
This has seen the creation of a Fiat Group Purchasing Offices in centers such as New Delhi, India. Fiat’s Suppliers System plays a fundamental role in ensuring the competitiveness of the Fiat Group and achieving maximum customer satisfaction. This is a key step in the direction to achieve group’s 2007-2010 growth and margin expansion plan. Group Purchasing plans to buy € 8.5 billion of components for Fiat Group plants from best- cost countries (BCC) including India & China by 2010.
Speaking at the launch of the New Delhi offices, Fiat Group Executive Committee member and Chief Executive Officer of Fiat Group Purchasing Italy, Gianni Coda, said “good faith, loyalty, fairness, transparency and respect for the group’s fundamental values are the guidelines that inspire and guide the relationship with the suppliers system in Fiat Group. The newly formed Group Purchasing Office in New Delhi will be responsible for the BCC purchasing for all the FIAT sectors. These include Fiat Group Automobiles, CNH, IVECO, FPT (Fiat Powertrain Technologies). We are optimistic on sourcing from emerging economies like India and China”.
The Indian offices follow the opening in 2007 of the China Sourcing Office in Shanghai. “Our foremost interest will be in establishing and strengthening strategic FIAT-Suppliers relationship in India that is a very important part of our growth plans,” said Coda.
For Fiat, 2007 proved to be an important year that saw the completion of the industrial turnaround plan launched in July 2004, and the achievement of all the sector and gGroup targets set at that time. Many of these targets were even exceeded. During 2007, Fiat started the implementation of the 2007-2010 growth and margin expansion plan, which will transform the Group into a significant international industrial enterprise.
Automotive Industries (AI) caught up with Coda.
AI: Is there a synergy between different sectors and how does that help you on a day to day basis?
Coda: Fiat Group Purchasing began operations in March, 2008. Because 60% of Fiat Group purchases are common to at least two sectors, we believe that a lot of synergy can be achieved through Fiat Group Purchasing.
AI: What is the policy of the newly created Fiat Group Purchasing department for sourcing from low-cost countries?
Coda: We decided to focus most of our efforts in China and India, creating local purchasing offices that can support the local market. These offices are in constant contact with the central commodities offices. Every time we identify efficient and competitive suppliers, we invite them to be involved in our sourcing of new applications. We have also reviewed our internal purchasing process for increasing our speed and effectiveness in catching these opportunities.
AI: From which low-cost countries are you currently purchasing?
Coda: So far, most of our purchases come from the Far East, Eastern Europe and North Africa.
AI: How much do you save on purchasing in China and India?
Coda: The average saving we get from China and India is around 15-20% including shipping and logistical costs.
AI: How long does it take to start sourcing from a supplier in a low-cost country?
Coda: It depends on the kind of product as well as the time taken to build production tools and test the product. On average we take about three months for the sourcing process and six to eight months for the product implementation and validation.
AI: How do you reward suppliers when they come up with cost cutting innovations?
Coda: Starting this year at the Fiat Group level, we rewarded suppliers who helped us to cut costs in two ways. The first way is through the "Su.Per." Procedure which was developed as a win/win approach. In this case, we share 50 % of the first year’s savings that resulted from supplier proposals. This is evaluated case by case and awarded according to the procedure indications. Su.Per. is an FGA procedure: we are extending it at Fiat Group level. The second way we award suppliers is by giving them the "Fiat Qualitas Award." The awards ceremony takes place during the annual Fiat Group supplier conference and we award the best in class suppliers in terms of proposals.
AI: How does your strategy help to leverage purchasing in Russia and China?
Coda: Wherever we are, we try to develop a local supplier network that can support us in the local production needs as well as export needs. Our relationship with suppliers in Russia, China and India are some of the most important examples of that.
AI: Fiat Bravo’s launch took only 18 months. What are the new purchasing developments that will help you gain lead production time?
Coda: We are able to gain such lead production times because we are extending virtual analysis for technical feasibility to the processes of our co-design suppliers. We will launch the new Delta in 17 months. Moreover, have put a lot of energy into: increasing the involvement of suppliers in style settings, reducing sourcing time through more efficient processes, monitoring and supporting our supplier’s tooling makers and finally, monitoring our supplier’s production and qualification of products as well as their manufacturing processes.
AI: How did the Purchasing Department contribute towards Fiat’s return to profitability?
Coda: In our business plan, the contribution of the purchasing organization is about 1.9 billion Euro, including a raw material impact of about 1.2 billion Euro. The gross contribution is about 3.1 billion Euro.
AI: Do you have a plan for rescuing suppliers?
Coda: Fiat Group Purchasing's purpose is to build a steady partnership with its suppliers.
Fiat Group Purchasing
Fiat Group Purchasing manages purchasing for the entire Fiat Group. Fiat says it was created to ensure that common objectives are achieved consistently with the targets of the various sectors: Fiat Group Automobiles, Iveco, CNH, and FPT- Fiat Powertrain Technologies.
Fiat Group Purchasing manages an international pool of suppliers numbering more than 10.000 firms, and a total purchasing volume of over 35 billion euros.
The Company promotes synergies across the Group by integrating purchasing activities from a managerial and organizational perspective. It defines purchasing strategies for common commodities, creating and reinforcing a global partnership with suppliers, for whom stability and an opportunity for development will be ensured.
The Fiat Group Purchasing organization is made up of three areas: Commodities, Sectors and Responsibilities. Commodities defines common purchasing strategies and guidelines. For each macro purchasing area, it will present suppliers with a common interlocutor. Sectors manages product development, pursues quality goals and contributes to achieving the financial objectives of the various Group companies. In order to reach set objectives and ensure the efficient functioning of the organization, Fiat Group Purchasing relies on four Functions: Information Technology, Human Resources, Strategic Planning, and Finance.
Fiat is creating partnerships around the world to optimize the supply of components. An example is a joint venture in between Fiat-owned Magneti Marelli and Unitech Machines for automotive electronic systems.
Eugenio Razelli, CEO of Magneti Marelli, says: “We have created five joint ventures in less than one year in a crucial market such as India, thus completing our localization plans in that country. This is an important result that bears witness to our ability to be present in emerging markets and to our flexibility in supporting carmakers in key production areas for their global activity. We have reproduced the entire perimeter of our activities in India’s main automotive industrial districts, from powertrain to lighting, from exhaust systems to shock absorbers and now electronic systems too. For this fifth joint venture, we found in Unitech Machines the ideal industrial partner with whom to develop our business in a strategic sector such as instrument clusters and electronics, which also includes telematics”.
According to the agreement, the new company is 51% percent owned by Magneti Marelli and 49% by Unitech Machines. The joint venture is set to be operational by the end of the first quarter of 2009.
The industrial facilities will be located in Manesar - in the industrial district of Gurgaon, approximately 40 km southwest of New-Delhi - in an area strategic to the automotive sector and where Magneti Marelli already has two other joint ventures in place for the production of engine control units and exhaust systems, respectively.
The activity will be aimed specifically at the design, production and assembly of motor vehicle electronic components, such as instrument clusters, body electronics (control units that manage main vehicle functions) as well as telematic devices. The activities of the JV will be addressed to local and international carmakers operating on the Indian continent.
Unitech Machines is active in the Indian two-wheel and four-wheel vehicle components sector, and it is also part of the Unitech Machines group chaired by V.K. Chhabra and operating in various sectors, such as Power, Telecom, Automotive and Infrastructure.
Sushant Chhabra, joint managing director of the Unitech Machines Group says: “this JV will put Unitech Machines auto division in the high technology space for auto motive electronics. We would be adding value to all new generation launches of OEMs to fulfill their electronic needs for futuristic instrument clusters, body computers and telematics. MM global expertise will be available through this JV and we look forward to our customer support”.
Magneti Marelli, a company belonging to the Fiat Group, designs, produces and distributes advanced systems and components for the automotive industry. With its 46 production facilities (56 production units), 9 R&D centers and 27 application centers in 16 countries, 28,000 employees and a turnover of five billion Euros in 2007. The group supplies all the leading carmakers in Europe, North and South America and the Far East. The business areas include: Powertrain, Lighting, Electronic Systems, Suspensions and Shock absorber systems, Exhaust Systems, Aftermarket Parts & Services, Motorsport.