Founded in 1994 and headquartered in Gillingham, UK, Delphi manufactures solutions for the automotive sector and believes that suppliers play an integral and important role in the manufacturing process. Sneha Ambastha from Electronics Bazaar spoke to Sanjay Naithani, VP, purchasing, Delphi India-Packard electrical/electronic architecture division, to understand the procedures it follows when selecting the right suppliers for the components the company needs.
EB: How important is it for your business to source the correct component from the right vendor? What is the business impact of not being able to do this?
Increased competition, changes in consumer behaviour and shorter product life cycles are forcing companies to develop new innovative products and efficiently manage inventory. This is possible if you maintain a good relationship with partners. If you align with your suppliers and treat them as business partners, your business and theirs will experience higher success rates, decreased risks, and enhanced collaboration and innovation. Thus, the right selection of the components from the right vendors will help improve business growth.
EB: Which are the types of electronic components that you procure?
Delphi is a leading global technology company for the automotive and commercial vehicle markets, delivering solutions that help make vehicles safe, green and connected. We provide a wide range of products to customers including electronics and electrical systems, powertrain systems, electronics and safety systems, etc. In each division, electronic components are an important part of our sourcing portfolio. In the connection systems department that I work for, for example, we buy connection systems, relays, fuses, junction boxes, diodes and fuses. We always source components that are compliant with environmental regulations such as RoHS and ELV.
EB: Do your vendors need to have a specific turnover or quality certification? And is there any particular process for vendor enrolment?
Supplier related strategies are key components of overall organisational growth strategies. Supplier evaluation requires assessing a number of factors. These include supplier capability, management, product width, and the analysis of certain key metrics and how each supplier performs in relation to them. Our assessment also covers a supplier’s control over the manufacturing process, the management’s commitment, the strength of a firm’s design and development processes, as well as the systems in place to make sure that the organisation is working efficiently in an integrated fashion. We prefer suppliers with ISO/TS 16949 and recommend that they upgrade to this certification from ISO 9000.
EB: How do you classify and define potential, approved and preferred suppliers?
Potential suppliers are those that we evaluate for their overall competitiveness. They undergo a rigorous technical, commercial and financial evaluation process before they are considered for any potential business. It takes a lot of time and effort to bring suppliers on board because of our strict evaluation process.
Approved suppliers are those that have passed Delphi’s evaluation process and have been approved by us. We source our requirements from these suppliers.
Partners that are leaders in their field and bring the best technology to Delphi are our preferred suppliers. Delphi and its preferred suppliers together invest significant resources to develop new technologies. In addition, these suppliers meet Delphi’s requirements of being strategic suppliers and provide a competitive advantage to the company, in the areas of technology, cost, continuous improvements and investments. Our expectation is that suppliers must remain competitive through all business cycles. Preferred suppliers are 100 per cent in synchronisation with Delphi and share the common objective of serving Delphi’s customers and markets.
EB: Do you have any vendor development programme?
Supplier development is the key to sourcing strategies. Delphi follows a comprehensive process of developing suppliers. It starts with the advanced product quality planning (APQP) process followed by supplier management. We have a 10-step supplier performance development programme (SPDP) that comprises advanced product quality and production cycle planning. This includes supplier assessment, risk management programmes, product development, performance monitoring and improvement, and development management.
EB: Do you have any special programmes for ‘Made in India’ suppliers or MSMEs?
We focus on localisation and increasing local content. We work on the strategies that are devised on the basis of categories and technologies. There is a continuous focus on making technologies available locally to Delphi. This includes buying from local sources, getting global suppliers to manufacture and provide support in India, and providing technological support to local suppliers to enhance their capabilities. Buying locally will remain key to all manufacturers as it will lead to reduced currency risks, better inventory management, improved flexibility to changes in market demands and better collaboration with suppliers.
EB: What are the typical ‘hard-to-find’ categories for which vendor development is a challenge?
High-end tool manufacturers for complex connection systems, fuse boxes, relays, high temperature cables, precious metal plating for sensors, etc, are hard to find.
EB: How do you find a suitable alternative for a failed (end-of-life) component?
We have strategies in place for dual sourcing and managing the risks related to end-of-life parts. This includes working closely with suppliers to develop alternates well in advance and seek approval from customers. We continuously look for parts with no alternatives, and work with suppliers and customers to develop and approve alternatives.
EB: How do you find a suitable alternative for a component supplier who drops out from the business due to bankruptcy or other business pressures?
Delphi uses third parties for the ongoing financial assessment of its suppliers. This information is available to us through our sourcing system. We proactively screen all the suppliers that have the potential to be financially troubled in the near future. We approach and interact with the top management of such suppliers to understand their plans to mitigate the risks involved. We also evaluate the magnitude of the risk to Delphi and all the possible alternates in case the supplier fails to come out of bankruptcy.
EB: What happens when suppliers have to close down low-profit product lines, leading to no customer support being offered for those products?
We have long-term relationships with our suppliers. There is proactive engagement with the supplier. If there is any issue with parts related to volume or cost, suppliers are mature and they understand that overall customer profitability is more important than profitability at an individual-part level. In case there is a need to stop the manufacture of a particular part, it can be done after it has been replaced by a new generation of parts from the supplier.
EB: How do you combat the counterfeit or grey market?
We follow a very detailed supplier evaluation and selection process and hence there is no scope for parts from unapproved sources. Moreover, we have an ongoing supplier performance management and audit process in place. We also use third party labs to get some of the critical raw material evaluated on a periodic basis to ensure that we are protecting Delphi and our customers.