Cost Management Of Passenger-Vehicle Component Sourcing

Severe competition of China automotive industry mainly focuses on manufa- cturers'core and differential capability competitiveness. Cost down, Efficiency up (CDEU), as one of the core capability, has become the common consensus in the automotive industry. Under this circumstance, self- development capability is attached great importance for dramatically en- hancing core competitiveness. Meanwhile, each OEM has many vehicle models with various kinds of outsourcing components and frequent engineering ch- ange of them. How to innovate the business model, procedure, method, tools of cost management and how to combine cost management with electronic system have become a critical issue to be addressed.This paper starts with the definition of the entire life-cycle of component purchasing cost management, namely from the perspective of advanced pur- chasing cost management and production purchasing cost tracking management, to illustrate the innovative study of the business model, procedure, method, tools of cost management and the e-procurement system to realize the ele- ctronic systemize of cost management.Business model, procedure, method of advanced purchasing cost management reflects engineering economy theory. Product cost can be obtained from the design. In terms of the allowable cost budget, Engineering, Purchasing and Finance jointly work to introduce the Design Concept Sheet (DCS), to do the cost breakdown, value analysis, value engineering top-down(vehicle level-system level-core component level), and to do the consolidation, ad- justment, validation of true cost bottom-up(core component level-system level-vehicle level). After many rounds of supplier assessment, brain- storming, simultaneous engineering solution, and through internal program valve review to further obtain the management directions and approval for technical proposal adjustment. Thus the most optimized cost design proposal is confirmed and bought-in by stakeholders. The component cost can be managed and decreased from the very beginning. This procedure has been started to implement during SGM new program development, and accordingly the whole package of material cost decrease about 30% comparing with the benchmark. It covers all the steps from design, supplier selection, product validation and manufacture, and can be widespread to control and manage the cost of automotive self development program.Traditionally component cost tracking files after batch production is main- tained manually, which results in the work burden and abundant resources of purchasing. Besides, the accuracy, consistency, and efficiency cannot be further improved. With the development and establishment of e-procure- ment system tracing files, those disadvantage and not-realized function of SAP system is solved to some extent and it also can provide the electronic data source for e-purchasing system.Suppliers and buyers'performance appraisal management is the main part for purchasing internal and external management. Before, their performance is judged based on manual statistics. With the help of electronic management module, simple and effective math-module is established. For vehicle spe- cifications, supply volume, commerce and other major cost drive, system can calculate, consolidate, and make report so as to help and guide the work of purchasing leadership, buyers and suppliers. With E-procurement system, effectiveness and accuracy of suppliers and buyers'performance appraisal, calculation of cost can be basically met.