BMW procurement system streamlines the MRO buy
Purchasing manages agreements for strategic commodities
Staff -- Purchasing, 5/5/2005 2:00:00 AM
At the BMW Manufacturing Co's Spartanburg, S.C. plant, the purchasing operation has put in place a procurement system that automates many tactical activities long associated with the indirect materials buy. The system allows the purchasers to spend more time on such strategic activities as managing the plant's strategic suppliers of indirect materials. Equally as important, the procurement system provides suppliers with one consistent process for doing business with the plant, whether they provide critical spare parts or items for production and support.
The BMW Manufacturing Co.'s Spartanburg, S.C. plant, the only BMW plant in the U.S., manufactures the Z4 Roadster and the X5 Sports Activity Vehicle (SAV). In 2004, it produced 140,894 vehicles. The plant spends $300-400 million annually on indirect materials. At Plant Spartanburg, the purchasing operation defines indirect materials as goods and services that do not leave with the finished product.
The plant's MRO (Maintenance, Repair and Operations) buy is made up of industrial supplies and parts used to maintain production equipment and plant facilities. The materials are inventoried in a central storeroom with satellite operations located throughout the plant.
With the help of the plant's IT group, purchasing developed the BMW Procurement System over the past three years using the purchasing module of mySAP (version 4.6C). Before, the buyers spent much of their time communicating with the plant's indirect materials suppliers via fax machine; in one year they would process some 17,000 transactions. Plant Spartanburg has used the software since 1994.
"The old way of doing business was very time consuming and unreliable," says Jason P. Trevison, buyer, storeroom (MRO spare parts), BMW Procurement Systems. "Sometimes, suppliers said they did not receive the orders."
Now, the BMW Procurement System automatically sends orders with shipping labels directly to suppliers. It tracks e-mail/EDI delivery and receipt. Suppliers have the capability to access the online system via digital certificate to confirm orders, verifying such data as quantity, description, price, and delivery date.
"Without the BMW Procurement System, we would not be able to efficiently serve the plant and bring value to the organization," says Trevison, explaining that while the facility has grown significantly over the years, the number of buyers has remained constant. Instrumental in developing the system in conjunction with the purchasing operation is Marina Papenhuyzen, IT applications & support.
Plant Spartanburg uses a Computerized Maintenance Management System (CMMS), SAP plant maintenance module, to generate reservations of parts used to maintain equipment. Users create reservations for inventoried and noninventoried parts, allowing for charging of parts directly to an equipment or functional location. In the future, with a PDA (Personal Digital Assistant), a user scans the piece of equipment to be maintained. The data generates a bill of materials. The user tags the items on the BOM that he or she needs and when he or she arrives at the storeroom window, the items are there waiting for pick up. Mike Bates, senior buyer, manages the procurement strategy and orders placed through the CMMS using the BMW Procurement System.
So far, the purchasing operation has set up more than 700 of the plant's 2,200 indirect materials suppliers on the BMW Procurement System. Using scheduling agreements, the purchasing operation has also set up an automated inventory reordering system for storeroom suppliers (OEMs and original part manufacturers) to provide critical items for the plant's Paint Shop, Body Shop, Assembly and Facilities operations. They are critical, Trevison explains because if the part is not available it could shut down the production line indefinitely. Suppliers confirm orders on the BMW Supplier Website.
As MRO items arrive at the plant, materials receipt is immediately logged into the BMW Procurement System. "We track materials as soon as they hit our premises," says Trevison. "We don't want to have to rely upon goods receipt from the end user."
Since 1998, Plant Spartanburg has outsourced production and nonproduction consumables operations of the storeroom to allow for more value-added activities. This supplier, which has 14 people onsite at the plant, is responsible for filling requirements for general industrial supplies and asset management. It owns the inventory in the storeroom (which turns 23 times a year); BMW pays for the items it purchases as the plant uses them. They process approximately 33,000 transactions annually. They also manage the asset management (spare parts repair) through a diversity supplier. Rudy Simmons, lead buyer, Assembly & MRO, manages the agreement with this supplier.
This supplier is one of the strategic commodity suppliers that provide the MRO items in these product groupings: electrical; power transmission and bearings; electronic; welding supplies; hydraulics and pneumatics; and pipes, valves and fittings. The purchasing operation has negotiated agreements with the strategic suppliers, many of whom have been providing the plant with goods and services since it was first built. Cross-functional teams select the suppliers and track their performance through quarterly reviews and an annual audit. In addition, an automated supplier rating system has been developed which will be implemented in the future.
The plant also uses the BMW Procurement System for small-value orders (SVO). The end user creates a requisition in the system and once it receives approval from management and finance, a PO is automatically generated and is sent electronically via e-mail to the supplier. Also, the plant uses frame agreements set up by the purchasing operation, which can be used by different department cost centers because each release must receive manager and finance approval before a PO is automatically generated and sent electronically via e-mail to the supplier. Various maintenance groups use SVO and frame agreements for noninventoried MRO spare parts set up with the strategic suppliers.
Plant Spartanburg has also implemented an E-procurement B2B tool, ARIBA SpeedBuy (version Buyer 8.0) to process repetitive buys for selected commodities, including MRO items, whereby plant users go online to place orders through electronic catalogs.
MRO buyers' 30-day price expectations
Commodities voted most likely to rise in price
| Up | Down | Same | Index | Change | |
| * Above 50=rising, below 50=falling. SOURCE: PURCHASINGDATA.COM |
|||||
| Special fasteners | 43% | 0% | 57% | 71.4 | Up |
| Flat belting | 33% | 0% | 67% | 66.7 | Up |
| Temperature controls | 33% | 0% | 67% | 66.7 | Up |
| Motor controls | 31% | 0% | 69% | 65.4 | Up |
| Lubricants | 29% | 0% | 71% | 64.3 | Up |
| Seals & rings | 27% | 0% | 73% | 63.6 | Up |
| Lighting fixtures | 25% | 0% | 75% | 62.5 | Up |
| Electric motors: 1-30 HP | 23% | 0% | 77% | 61.5 | Up |
| Rubber hose | 22% | 0% | 78% | 61.1 | Up |
| Cutting tool inserts | 20% | 0% | 80% | 60.0 | Down |
| Gears | 20% | 0% | 80% | 60.0 | Up |
| Adhesives | 15% | 0% | 85% | 57.7 | Down |
| Test instruments | 14% | 0% | 86% | 57.1 | Down |
| Nonfriction bearings | 12% | 0% | 88% | 56.3 | Down |
| Grinding wheel | 9% | 0% | 91% | 54.5 | Down |
| Lift truck batteries | 0% | 0% | 100% | 50.0 | Down |
| Speed reducers | 12% | 13% | 75% | 50.0 | Down |
Schneider moves its MRO buy online
04/01/2003
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