Page 327 - The Toyota Way Fieldbook

302 THE TOYOTA WAY FIELDBOOK

Purchasing must look with trained eyes and see opportunities for cost
reduction.

Cost-profit planning is the ultimate form of cost management. Delphi
is training its buyers to be able to estimate cost more precisely, identify
opportunities for improvement, and lead cost planning projects. The
previous approach to buying was like the “caveman who is hunting and
gathering.” There were multiple rounds of bidding and poker playing.
Delphi is now moving to “modern agriculture”—based on logic, science,
and reality changes. The game changers are cost standards, creative
improvement plans, and master supplier agreements.
In the real world, Delphi has found that suppliers’ quotes are much
higher than these cost models suggest they should be, even after
repeated price-downs. A cost model group is producing forms on cost
standards—price tables, price curves, and cost standard templates—
with data drawn from suppliers, supplier meetings, government and
industry data, Delphi internal sources, benchmarking, and competitive
analysis data.
Price reductions should reflect reality changes—materials (challenge
cost, design), labor through lean workshops, transportation (level
scheduling), warehousing (inventory reduction), and so forth. The
important thing is to change realities. Each buyer for each commodity
must develop creative improvement plans. Nothing is left unchecked.
Cost management means working very closely with suppliers to
achieve these realities.
Since design impacts 70 percent of the total manufacturing cost,
Delphi must involve suppliers early in the design development process.
To this point, Delphi had mostly focused on the 30 percent in manu-
facturing because it was easier to work on. The next frontier is for
suppliers working with Delphi’s product engineers to move up front
to product and technology development. The goal is to reach a level
where engineers can use cost standards to evaluate the impact of
different design options.
Delphi views this process as a major cultural change. It wants buyers
to be more than just “hunters and gatherers,” and instead to become
change agents thoroughly versed in cost management. It has developed
a list of 70 items that buyers should be able to see as they walk through
suppliers’ plants, and it expects them to have expertise in everything
they buy. As an example, a Honda buyer came into one of Delphi’s
plants for two days and listed 130 items that needed to be improved.
What is Delphi’s key to the success? In a word: trust! Suppliers will
never agree to use true costs as a basis for price setting unless they
trust Delphi to think about them as true partners.