When manufacturing a product, the partnership between OEMs and suppliers is pivotal. The relationship is unique and at the heart of it all is a process called the programme. Any existing vehicle model refreshed or new model created will require a programme that outlines all the project’s requirements, schedules and plans.
Automakers provide the components’ design and specifications, for which the supplier must quickly develop a comprehensive bid detailing every facet of production, quality assurance, and pricing—with just a few weeks to produce a breakdown of the total quotation and the manufacturing schedule.
If the supplier has previously created something similar, it might have a few ideas immediately to hand. “But often it’s something quite different, requiring innovation to launch a more technologically advanced vehicle. The supplier wouldn’t always have a chance to break down aspects such as whether it has the manufacturing and labour capacity to fulfil the order. All of this must be calculated after committing a timeline, schedule and budget for the OEM,” says Dave Opsahl, Chief Executive of Actify. Actify builds advanced project management systems, with 85% of its clients in the automotive industry.
Because the automaker manages the design, competing suppliers have limited options for differentiation when producing a programme. Suppliers stress their capability, quality, and reputation, but competition is often reduced to price and terms. “Winning often means committing to the risks inherent in high-volume, low-margin business,” says Opsahl. “In almost all cases, the supplier isn’t allowed to make an uncapped profit. Instead, it will often be contractually capped to a certain profit level.”