30 September 2010 | Sarah Campbell

By breaking free of over-powerful glass suppliers, Jaguar Land Rover reduced its costs and created a competitive marketplace

CATEGORY: International purchasing project of the year

When Jaguar Land Rover (JLR) became shackled by over-powerful suppliers, it set out to prove that fair competition could break the vendors’ hold on the automotive glass market.

In 2006, 90 per cent of JLR’s glass spend went to just one supplier, and the carmaker estimated that its existing suppliers were overcharging by between 15 and 20 per cent compared with market rates. At the time the European Commission was investigating, and in 2008 these suppliers were fined for operating a cartel.

But back in 2006, a team at JLR led by David Owen came up with an action plan: to work with existing glass suppliers to align pricing with globally competitive levels; to increase business to other glass suppliers; and to develop relationships with new vendors in low-cost regions.

By mid-2007 Owen and his team had developed a strategy. They reached a deal with one existing glass supplier to close the gap between what the provider was charging and the market rates that JLR had calculated by 50 per cent over three years. The more powerful supplier would not agree to this commitment, so Owen’s team planned to cut business with it by 50 per cent. They decided to introduce new suppliers for the glass in the next two models, and to source all the glass for the Freelander 2 from a single new supplier.

In October 2007, a Chinese supplier quoting prices 30 per cent lower than the level being paid was taken on for the Freelander 2 work. The new supplier lacked experience of heated windscreen manufacture; and the old supplier’s contract was due to finish in February 2009, meaning any delays would halt production. This was also the biggest resourcing project JLR had undertaken outside the UK.

But it was a success. Over the next 15 months, Owen’s team spent about one week in every seven in China, transferring knowledge and skills. Glass was delivered on or ahead of schedule, to budget. Warranty claims on the resulting windows and glass fell by 85 per cent. The move sent a message to existing suppliers that JLR had created a competitive marketplace. The new supplier was also better at customer service and responsiveness.

New-model glass quotes in general are now between 15 and 20 per cent less than before, saving the company up to £10 million a year. Both the investment costs and the lead times were cut by 50 per cent.

Also on the short list

AXA UK; Department for International Development; European Independent Purchasing Company; PZ Cussons International; Unilever HR Supply Management