The door is open for new suppliers

Steven Armstrong, Jaguar's Director - Purchasing, believes there is a powerful obligation on vehicle manufacturers to help Tier 1 suppliers to improve their efficiency.

He is equally convinced that the bigger first tier companies that benefit from the OEMs' supplier development initiatives should firmly accept the responsibility to ensure that improvements flow into the rest of the supply chain.

Mr Armstrong, whose department will spend £940 million (US$1.5 billion) with suppliers in 1999, says: "Quality is the key driver for Jaguar and quality has improved enormously in terms of our final product and in terms of incoming components from suppliers.

"We work very hard on supplier development initiatives to improve our suppliers' efficiency and I believe the next great quality challenge is to bring the second, third and fourth tier companies up to an acceptable standard.

"I expect Tier 1 companies to actively want the responsibility to deliver large parts of our cars and I believe part of that responsibility has to be managing the supply chain; some of them are very good at it and some need to get better."

He concedes there is a gap, chiefly among the small-to-medium firms (SMEs) in the British automotive supply chain, in terms of quality, cost and overall efficiency. He fully endorses the work of the UK SMMT Industry Forum, in which Jaguar is a key player, to improve the performance of these smaller companies to the standards of competitiveness that are essential in the global market.

Mr Armstrong, a member of the Forum, says its strength is in having the support of all the major UK OEMs and a number of large Tier 1 companies. "It is a unique group involving senior executives sitting down and saying they want a common approach to improve supplier performance. That should tell people that we are committed to improving the supply base."

The rationalisation of Jaguar's direct supply base from 900 firms in 1990 to 350 now is testimony to the tremendous pace of change in the industry; UK suppliers will only survive if they are prepared to change at an equal rate, he insists.

Mr Armstrong believes the quality and efficiency of UK-based suppliers has not always been to the same standard as it is in Germany and Japan, but he is convinced the gap in the SME sector is narrowing and will continue to narrow as improvements cascade down from the top into the rest of the supply chain.

"People are beginning to understand the need to manage their business through its performance on the shop floor," he declares.

Ford acquired Jaguar in 1989, a move that opened opportunities for the luxury car-maker to exploit a much broader supply base and to harness the quality disciplines Ford drives internally and throughout its own supply base.

Jaguar inherited Ford's quality standard, Q1, and uses QS9000, the international automotive standard as the accepted route for firms to achieve Q1. The stringent standards give the automotive company the benefit of being able to compare the performance of Ford and Jaguar suppliers.

All Jaguar's Tier 1 suppliers are required to have certification to QS9000 followed by Q1 and if they fail to do so, Jaguar willingly undertakes development programmes to help them reach the standard.

Crucially, each Tier 1 company also has to show as part of QS9000 that they are actively developing their own suppliers - the second, third and fourth tier companies - to meet those high levels of performance.

He insists the company's door is never closed to new suppliers with the skills, products or technology that potentially offers Jaguar a competitive advantage in the global market.

While the company does not have a big supplier turnover, there are always opportunities for new entrants. He cites as an example the new S-TYPE sports saloon - made at its Castle Bromwich plant in Birmingham - which has brought an additional 200 firms into the supply base.

The S-TYPE, employing state-of-the-art technology, was designed and developed at Jaguar's Engineering Centre in Whitley, Coventry and made its world debut at the Birmingham International Motor Show in October 1998. It compliments and extends the company's existing range of XJ Series saloons and XK sports cars.

The new, three-model line up is expected to boost Jaguar's annual sales to 85,000 in 1999, with the S-TYPE forecast to capture world-wide sales of 40,000. The US - currently Jaguar's biggest single market - and Europe are expected each to represent 40% of the sports saloon's sales in 1999.

Before the S-TYPE, about 65% of Jaguar's supplies came from UK sources - British firms or UK-based overseas suppliers - but the percentage has fallen to approximately 40% for the sports saloon.

This is primarily due to taking on more North American produced material and because the S-TYPE marked a new era of joint development with Ford and shared its platform architecture with the new Lincoln LS model.

Major suppliers were also fully integrated into the S-TYPE programme module teams to ensure their full commitment to the project and to thoroughly understand the rigorous design and quality requirements for the new car.

Early sourcing priorities were based on four criteria: component quality history, long lead time, high value and degree of technological change. It goes without saying that only suppliers capable of meeting Q1 requirements were selected.

Mr Armstrong says Jaguar's current logistics strategy is to revert to more components and systems being produced and sourced in the UK, taking the percentage above 40% once again.

That will be the case for X400 production at Ford's Halewood plant on Merseyside.

Turnover and reductions in Jaguar's supply base over the years have been for a variety of compelling reasons. Some failed to survive the tough times of the early 1990s, while technology advances or the advent of a new vehicle are often the catalyst for firms to leave or join the supply base, as in the case of the S-TYPE.

An important factor, though, is the progressive drive by OEMs to work with full service suppliers capable of the design, development and manufacture of integrated systems and modules, which results in some Tier 1 firms moving into the ranks of the Second Tier.

Mr Armstrong urges British suppliers to take a positive view and seize the opportunities that can be created by these changes.

"The way in for a number of local small suppliers is to actively seek to be second tier and sell their abilities to the Tier 1 companies.

"They have to recognise they're not all going to be Tier 1. If you want to be a supplier to Jaguar, don't think of just being Tier 1, but think of the opportunities to be Tier 2 and look at it positively. It can open up opportunities to companies with maybe only 50 employees - machining companies, press workers, small injection moulding firms and the like.

"A number of traditional first tier suppliers see it as a downgrading of their status to be a Second Tier company, but there is no stigma attached to being Tier 2," he says.

In today's tough, competitive environment, suppliers of automotive commodities such as trim and chassis inevitably need a huge financial and technological commitment to design and development activities that is far beyond the reach of many smaller firms.

Mr Armstrong says new suppliers will almost certainly be brought on board for the X400 programme, in which Jaguar is investing over £400 million, a similar amount to the S-TYPE project.

"Every time we have a new vehicle it has new technology requirements that give us the opportunity to look at new suppliers," he says.

Jaguar operates a robust new product sourcing process which compares suppliers on quality, cost, manufacturing capability and engineering ability.

He says that becoming a Tier 1 supplier to a major OEM operating in the global market involves high degrees of complexity that only best in class companies can achieve.

Jaguar's cars, for instance, are supplied into 70 different world markets with different regulations that require different specifications.

All the XJ8 and XK8s made at Coventry are produced from the same production lines and each must encompass the essential specifications demanded by the markets in which they are sold, either through regulations or through customer choice.

Mr Armstrong says: "We are building a truly world car from one site and every car is made to the most stringent quality standards. But there are different legislative requirements for different markets and that does drive complexity into our products."

Jaguar, for example, has a common safety restraint policy which means it engineers one safety restraint system to cater for all the legislation around the world. For emissions, the company has to cope with a wide range of different requirements in its markets; Californian emissions regulations are not only the toughest in the world, they are different from the rest of the US and from those in Europe.

The Japanese market has a greater demand for navigation systems, which is a factory fitted option on the new S-TYPE. Japan also has different crash requirements for its different market segments while in the US, customers prefer Jaguar's more powerful 4 litre engine rather than the 3.2 litre power unit on the XJ8.

Mr Armstrong says: "We have to engineer a vehicle capable of meeting all these requirements. We don't engineer two completely different body systems, for instance, but we might have two different bumper systems to cover different impact requirements in our markets.

"It means our suppliers have to be capable of designing or developing more than one version or - if we have design responsibility - to be capable of producing more than one version."

He is convinced that in spite of the relentless demands of the global marketplace and the intense pressures on suppliers to compete effectively, the UK automotive supply sector will continue to improve as it drives high standards into the supply chain.

Mr Armstrong says: "There is a lot to be enthusiastic about. Jaguar is on the up and the fact that Ford is prepared to put money into Jaguar tells people looking in from the outside that they believe it is going to be a success.

"We would not be investing money in the UK if we did not have the world class standards and world class levels of competitiveness that we do have."

Tier 1 suppliers play their part to meet delivery 'trigger' times

Up to five of Jaguar's key Tier 1 systems suppliers, including the US firm Lear, will be located on a supplier park adjacent to the Halewood plant, or within a few miles, in order to deliver straight into the facility when it builds the new X400.

This kind of sequenced delivery requirement is essential for the lean manufacturing and minimal stock environment that will be operated for the X400. It already applies at Jaguar's Coventry plant and it is increasing at Castle Bromwich.

Sequenced delivery involves very short "trigger" times for suppliers to produce and supply materials in sequence with the demand from the neighbouring assembly facility.

Trigger times will be notified to suppliers by Electronic Data Interchange (EDI) "tickets" to give, typically, up to five hours notice of demand for parts from the Halewood facility. Suppliers have to be within a certain radius of the plant if they are going to deliver in sequence and in time.

Director - Purchasing, Steve Armstrong says: "If we are to drive the whole of the value chain to be as efficient and lean as possible, you have to take out all the inventory, and suppliers have to work in sequence or in tandem with us and feed off our scheduling."

Jaguar has had to re-engineer a number of its supply businesses to cope with the demand for sequenced supply.

Pointers to follow

Potential new suppliers to Jaguar are subject to a thorough examination.

Director - Purchasing, Steven Armstrong, says Jaguar will use information available in the public domain to understand their performance characteristics, send them questionnaires that give an insight into their standards or even elicit feedback from car-making competitors to build a profile of a company to compare with existing suppliers.

Firms certified to QS9000 or other recognised industry standards will be at an advantage, but Jaguar also carries out site visits to investigate their performance.

Fact File

Company: Jaguar Cars Ltd.

Address: Browns Lane, Allesley. Coventry CV5 9DR

Tel: +44 (0) 1203 402121

Fax: +44 (0) 1203 405451

Website: www.jaguar.com

Activity: Luxury car-maker

Employees: 6000

Turnover: Not Available

Markets: Global

Added to the database on 27^th September 2001

Keywords: Jaguar, Ford, UK