ZF Group sees a big opportunity for the Indian-tier suppliers to elevate their status. Ashish Bhatia weighs in on the incremental measures that make it an ambassador for best practices.
ZF Group is reaching out to its tier suppliers or sub-contractors. It is coaxing them to tap into opportunities not just under the ZF umbrella but universal opportunities both existing and emerging. Be it domestically or internationally. The leading tier 1 supplier in its latest pursuit is seen pursuing goals that are beyond negotiating headwinds or making hay while there are tailwinds. It wants to look beyond managing capacity shortfalls and the fast-evolving market dynamics on the sustainability front. Quipped Joerg Schaupp, Senior Vice President at ZF Group, Global Commodity and Purchase that gone are the days when the supply metric were predefined, and so was the raw material estimate that made life a bit easier for suppliers. While turning more agile to deal with the unknown, the Group wants to be a guiding force for other tier suppliers in the country as well. With the future dominant technology to be ascertained as yet, the company wants to partner with suppliers in the value chain for the next big leap.
ZF, in India, is urging suppliers to be cautious given the volatility. It is also partnering with select suppliers for its target markets. The criteria to partner, stem from the historic demonstration of having proven management capabilities and the clear intent to align with a progressive approach down the road. While keeping a long-term horizon, the company has ensured, there are checkpoints in place to keep itself and its partners on track to achieving the end objective. Claimed Schaupp, the company is fully aware of the future scenarios that may force it to change tracks. “What we considered core in the past, may not be core going forward. And hence, we are looking for a strategic partner, who can take over what we then consider non-core,” he explained. Drawing attention to the past, when the stamping operations and aluminium die-casting operations were partially as well, core business points. He informed, today these are categorised as “non-core” in future considerations. To sustain the business, hence, the company needs an equally agile and strategic supply base to be put in place. So much so that such a non-core business could be reassigned to a tier supplier in the ZF value chain itself. The seemingly straightforward switch will be in turn backed by another layer of flexibility to deal with any unforeseen body blows as the Covid-19 era has taught us all.
Like the industry, at ZF Group, commodity pricing and the pass-through to customers continues to be a sensitive topic. To deal with the semiconductor shortage, for example, the company formed a 100-member task force to bottleneck. The “painful exercise” had ZF ironing out the chinks and at the end bring back capacity utilisation and augmentation on stream. Schaupp mentioned, when it came to passing through the pressures on the operating margins, to in turn meet the customer expectations of ZF absorbing these hikes partially, across the passenger car and truck segment alike, the Group with its partners resorted to ‘Sharing Agreements’. He elaborated, with all the dynamics in the raw material markets, there’s a clear expectation from our customer base, that we find ways to compensate partially for these increases. ZF is said to have sought a clear commitment from its supplier base to be able to mitigate the headwinds.
To ensure a high degree of localisation with globally suitable supplies, the Group works with local engineering teams and zones, informed Schaupp. Impressed by the evolution of Indian suppliers beyond just technological fronts, on fronts like manufacturing and infrastructure too, Schaupp hailed Indian suppliers for being ahead of the curve in more ways than one. To set an example for others to follow, ZF invests seven to eight per cent of its revenues back to Research & Development (R&D) activities. Notwithstanding the near-term teething issues and in line with a long-term horizon that the leap would eventually pay off. The Group in the words of Schaupp could do with more than just a helping hand from OEMs. This entails greater transparency at multiple layers. A lot of it has to do with the supplier base seeking clarity on customer demands and expectations. The Group also seeks government intervention and the realisation of supplier support required in an end-to-end value chain. For instance, the requirements of a supplier having to import raw materials like steel to in turn export the finished good need a look into, opined Schaupp.
It is perhaps an opportune time to also evolve beyond traditional roles as suppliers. Setting a benchmark by showcasing autonomous shuttles, for example, ZF Group has shown aspiring suppliers the way to tap a huge opportunity waited to be tapped into. An opportunity to scale up from a pure product and parts manufacturer to becoming an assembly or pre-assembly, assembly and system provider as well. Fresh off the WABCO acquisition, the company is confident of its ability now to be an assisted provider, by all means for its truck and trailer customers. Attaching with eligible suppliers as per its Group code, ZF, for its existing supply base, has put in place a continuous improvement program with a strong supply development management team, on-site, in India. While the ZF Group scouts for opportunities, it is also looking out for its partner’s interests, Schaupp concluded.
