Pergamon European Journal of Purchasing & Supply Management, Vol. 2, No. 4, pp. 169--172, 1996

Copyright ~ 1996 British Steel Plc Published by Elsevier Science Ltd. Printed in Great Britain

0969-7012/96 $15.00 + 0.00 S0969-7012(96)00012-3

Supplier-driven partnerships

Chris Butterworth Automotive, British Steel Strip Products, PO Box 10, Newport, Gwent NP9 0XN, UK

Partnership initiatives appear, in the main, to be initiated and driven by larger customers working with smaller suppliers, but there are exceptions. This paper demonstrates the strategy currently being used by a large supplier, which seeks to initiate and establish a partnership-style relationship with much smaller customers.

Keywords: partnership, steel

British Steel Strip Products (BSSP) is one of 11 businesses that make up British Steel plc, the world's third largest steel manufacturer, with annual produc- tion of almost 16 million tonnes at various sites around the UK. Most of the major European vehicle manufac- turers are supplied by British Steel, and approximately 20% of total production is supplied into the automotive industry. This is achieved mainly through BSSP, which has an annual turnover of approximately £1.8 billion (out of a total of almost £4.8 billion for British Steel plc) and some 10 500 employees. This compares with typical first-tier automotive presswork customers iden- tified by BSSP for inclusion in its partnership program- me, which typically have a turnover of less than £100 million.

These pressworkers are not supplied directly by BSSP, but via steel service centres, which process the steel coils to meet customer requirements. Historically, BSSP was seen by the pressworkers as a large organiza- tion operating in the background. Recently, however, in recognition of the structural changes occurring with- in the automotive supply chain, which are placing significantly increased responsibilities on its indirect presswork customers, BSSP has taken the strategic decision to develop a partnership programme to sup- port them - a step that could benefit the whole automotive supply chain. An analysis of this strategy, the structure of the programme, and the type of work done, will show how smaller companies can have successful and useful partnerships with larger suppliers, and that suppliers can initiate those partnerships.

Background

BSSP has long recognized that major structural changes were (and indeed still are) taking place within the automotive supply chain. Some of the key trends identified, which have a major impact on first-tier companies, are:

• ongoing supplier reduction programmes; • the planned growth in outsourcing; • increasing requirements for systems solutions.

Almost every European vehicle manufacturer (VM) is engaged in significant supplier reduction programmes, slashing the numbers of direct suppliers and indirectly creating a supplier-tiering structure. Simultaneously, the VMs are dramatically increasing - both by volume and value - the proportion of work that is outsourced. First-tier suppliers need to become system providers, capable of designing and integrating products despite ever-decreasing lead times. This paper does not intend to examine this process in detail, but simply to note some of the major consequences for the first-tier presswork companies.

There will clearly be far fewer first-tier companies supplying directly to the VMs in the future, and these companies will have to shoulder a much greater responsibility - not only for product design and liabil- ity, but also for material specification and selection. They will have to engage in major supplier reduction themselves, and in development programmes with their own supplier base. They will also have to pass on increasingly sophisticated logistics systems, such as ED1 scheduling and synchronized deliveries, to their own suppliers. In order to achieve this, they must work in partnership with both customers and suppliers, to achieve the cost reductions essential to retain competi- tiveness. Because steel can account for up to 50% of the total costs for the automotive presswork com- panies, BSSP decided that it was ideally placed to provide help and assistance to meet those challenges, and that any strategy that improved the overall com- petitiveness and strength of these companies would be to the advantage of the whole supply chain.

Historically, communications within this particular supply chain have been on a one-to-one, self-contained basis, tending to result in some duplication of effort and

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an amplification of schedule variation (although direct communications do exist between all parties and for different supply routes - for example, BSSP and the service centres supply direct to the VMs). One aspect of the new partnership initiative is to build upon existing links and establish new ones, so that all of the partners in the chain can work together, reducing waste and improving overall competitiveness.

BSSP's partnership strategy The partnership strategy has been started with a range of related initiatives, which concentrate on commercial and technical support to the selected customers, includ- ing:

• supplier days; • specialist supplier days; • finite element analysis; • early vendor involvement; • consultancy and support activities.

Supplier days

A separate 'supplier day' is organized for each indi- vidual customer, based at a BSSP site. The event is attended by a customer's employees representing va- rious functions, such as purchasing, technical, produc- tion and (usually) sales, as well as BSSP and service centre personnel (again representing various functions, including commercial, technical, production and logis- tics). A presentation is given by a representative of the customer, outlining the company's organization and what it is seeking from its suppliers. Several presenta- tions are then given by BSSP covering the partnership initiative, overall commercial objectives and strategy, organization structure and the range of customer tech- nical services that are available. There is a discussion on general supply chain issues and a detailed presenta- tion on a specific subject (agreed in advance) of particular interest to that customer (eg high-strength steels).

The event also takes in a tour of the steel production facilities, in order to explain the manufacturing pro- cess, and a detailed inspection of the Customer Tech- nical Centre (CTC), during which the guests are intro- duced to key technical experts in specialized subjects such as forming, welding and bonding. In addition, the customers are given practical demonstrations of the type of assistance available to them in the areas of problem-solving, and the design and development of new products, utilizing new technologies such as laser cutting and welding.

The day ends with a round-up session, where follow- up actions are agreed and 'champions' nominated for any specific issue that has been raised. The service centres are closely involved in all of this activity, in order to ensure that the efforts of the whole chain are coordinated. A follow-up meeting, with representatives

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from all parties, usually takes place at the customer's premises.

Specialist supplier days

Specialist supplier days are arranged with customers in order to cover specific topics that both parties agree are of particular interest. The events are entirely funded by BSSP and utilize the services of outside experts. It is usual for more than one customer to attend such an event, thereby providing a unique opportunity to dis- cuss practical experiences in the particular subject area.

To date, the principal topic covered has been the cultural and commercial aspects of business dealings with Japanese companies - particularly relevant in the light of the projected growth in demand from UK- based Japanese manufacturers. Other days are also being run on finite element analysis, and there are further topics currently under discussion. In addition, technical courses specifically tailored to customer re- quirements are run by BSSP technical staff at the Customer Technical Centre.

Finite element analysis ( FEA )

BSSP has identified FEA as a key technology for reducing up-front development costs and lead times, with specific reference to material performance in the press, and optimizing material specifications and blank shapes in advance of tool completion. This cuts costs by reducing press try-out time and initial production prob- lems; where appropriate, FEA can also be used to resolve problems in producing existing parts.

In order to demonstrate and prove the advantages of this technology, BSSP has, in addition to its own FEA facilities, awarded a major contract to an independent, university-based company, whose resources are dedi- cated to the presswork customers. A series of seminars is now being run (in roughly the same format as the specialist supplier days). These detail the practical workings of the technology, and explore real applica- tions.

By providing this service, BSSP is funding the ongoing development of this technology and proving its practical advantages. Customers can thereby gain con- fidence in the long-term use of such technologies, and make informed judgements with regard to future in- vestment in FEA capabilities by their own companies.

Early vendor involvement

Experience has shown that up to 80% of the cost of a part is determined by the design. Therefore, as part of the technical support it offers to customers, BSSP actively promotes and supports the involvement of the material supplier at the concept and design stage of any part, in order to optimize the material solutions. Part of this process includes the proving and trial of new technologies, such as laser welding and the computer- ized modelling of parts using FEA. This is seen as a key

Supplier-driven partnerships

to supporting customers, whose responsibilities in this area are increasing all the time.

Consultancy and support activities

BSSP also funds a team of consultants to support the pressworker supply chain, the aim being to improve overall competitiveness by offering advice on oper- ational and strategic issues. Such support is available on various cost-down initiatives and supply chain manage- ment issues, as well as on specific projects raised by the customer. Internal BSSP resources can offer specialist advice on topics such as EDI, while links have been established with industry bodies such as the Society of Motor Manufacturers and Traders, so that relevant data and developments can be fed back to customers. The consultancy team also helps to facilitate and imple- ment the various aspects of the programme, and active- ly promotes the partnership approach through the whole supply chain.

It is intended to have invited selected key customers to take part in the programme and to hold an initial supplier day with all of them by the middle of 1996. Several additional topics are under consideration for the specialist supplier days, and plans are being ex- plored to expand significantly the amount of consultan- cy expertise offered under the programme by linking with a UK university.

Supply chain management A prominent part of this partnership approach is the development of several areas of supply chain manage- ment, such as the following.

Supply chain mapping

Working with pressworkers and VMs, the routeing for particular parts is mapped through every link in the supply chain, from raw material to finished product. This means that when an order is placed for raw material, the quality requirements of the final part can be fully understood and monitored at every stage of production. This mapping through the whole supply chain also creates opportunities for pooling low-volume requirements of specialist materials, and enables material availability to be more readily checked if a problem occurs.

Process mapping of logistics interfaces

Through meetings involving representatives of each member of the supply chain, it is possible to map the mechanisms used to generate orders and scheduled demand from VM through to raw material. By working in partnership it is possible to remove duplication of effort and reduce the time taken for information to get through the chain. For example, a simple reconfigura- tion of data can remove the need for the complete rewriting of information. This work can also be used to prepare the systems for the implementation of EDI.

Total stock reduction

By working in partnership it is possible to reduce the total stock held in the chain through a better under- standing of the demand pattern. The composite pro- duct lead time from raw material to VM can also be reduced through the implementation of pipeline supply arrangements that work on the basis of continuous replenishment and agreed call-off mechanisms. By targeting key items using Pareto analysis of consump- tion and risk assessment, buffer stocks can be planned and controlled, and thus kept to a minimum.

Joint cost-down teams

As material can represent up to 50% of the total product cost potential, opportunities exist for material optimization that can have a significant impact on the final product cost. In order to address this, joint teams have been established comprising commercial and tech- nical representatives from BSSP, the service centre, and the presswork customer. Regular team meetings are held and various techniques used to provide and access possible cost reductions: for example, changes in material specification, size, thickness, etc. In specific cases, where a particular part is considered in detail, VM personnel also form part of the team. Once established, these teams can develop a wider focus and consider new product optimization and alternative pro- cess options ahead of production, leading to a simul- taneous engineering approach.

Opportunities for purchasing and logistics

While this initiative is supplier generated, there are a number of implications to be considered by purchasing and logistics personnel. One such implication is that they could be instrumental in persuading their own company to instigate partnership programmes with customers. This will create opportunities for supply chain management and cost reductions involving joint work with customers and suppliers, for example in reducing total stocks and lead times. Also, the closer involvement of purchasing and logistics personnel with customers will provide additional - and very useful - perspectives, which in turn can be reflected in what they require from their own suppliers.

Summary and conclusions As a result of BSSP's partnership initiatives, new supply chain communications have been established and continue to evolve, to the benefit of every member of the chain. However, as with any successful part- nership, all parties must not only believe that there is something to gain from the relationship, but must also perceive that they are achieving those gains. For BSSP, there is the expectation of retaining existing business and growing with the customer, as that customer wins new business. For the pressworker the partnership provides access to a host of technical and commercial

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resources that, in all probability, it would not be cost-effective to duplicate at a company level.

Partnerships also contribute, indirectly, to the win- ning of new business by generating improvements in competitiveness. The whole chain benefits from the cost reductions that can be achieved, providing a more competitive supply route to the VM and, ultimately, the end user.

The partnership initiative has been well received and is beginning to show benefits for all concerned, but requires much time and effort to build trust and establish relationships - all the more difficult where direct customer contact is not part of the day-to-day trading relationship. While some of the shorter-term cost reduction benefits can be quantified fairly easily, other benefits are longer term and difficult to assess -

for example, establishing the communication links that ensure that a problem does not arise in the first place.

Enlightened suppliers realize that it is in their own interests for their customers to be successful. Once this is accepted, a partnership programme designed to aid success is an ideal strategy to pursue. By working in partnership, a smaller company purchasing from a much larger supplier can take advantage of resources and expertise that would be difficult to self-finance: as a result, it can offer extended services to its customers. The potential for partnership should be viewed not only as a one-to-one relationship between two companies, but as an opportunity for all elements of the supply chain to work together to eliminate waste. Competitive advantage will be achieved only through cooperation - not confrontation.

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