Transparency All Along the Line
New vehicle model series require new production equipment. Planning, Cost Engineering, and Procurement are fine-tuning the optimal concepts together with the suppliers. REC provides binding costs from the quote to the contract award for the first time. As an engine for joint improvements in the entire supply chain.
It has long been in successful use for purchase parts. And now it is logically transferred to the procurement of equipment in the global production network of Mercedes-Benz Cars – REC, the reference calculation. Together with the suppliers, Planning, Cost Engineering, and Procurement have been relying on the calculation method since 2014. It is used for the manufacturing areas of assembly, body shell, and material handling technology; at first for a few current model series as a test. The unanimous verdict about the pilot phase: a success story! That is why REC has been optimized for these areas since 2015, and is gradually being used for other existing model series. REC starts on a broad basis with the equipment for the Mercedes-Benz S-Class successor generation. Additional new model series will follow by and by starting in 2018.
On the road to the optimal value
REC allows defining costs in line with market conditions for every equipment purchase. A method that allows all parties involved in the supply chain to achieve an optimal result. But how does REC work exactly? The standardized approach is also referred to as a “bottom-up calculation”. The starting point is a technical design (equipment layout), for example for a production line with welding robots in body shell construction or for a rolling road in assembly. It is prepared by Planning.
Cost Engineering uses REC to calculate the ideal-typical business figures for the equipment layout. Ideal-typical in terms of being defined independently of characteristics of the suppliers, economic influences, or local factors. The in-house calculation reflects for example costs for commodities, materials, machinery, human resources, production expenses, shipping, and earnings. REC provides transparency on what the procurement of the production line with welding robots or the rolling road may cost ideally. And what the components of the price are in detail.
In the past, we looked to quotes from the past for orientation. Today, we look to the best possible concept.
The REC result represents the economic and technical optimum of a particular piece of equipment. It is the reference for all further steps in awarding the contract. At first, Procurement will send out requests for bids based on the technical design. The bids can then be analyzed in detail based on the optimal procurement price. Deviations from the detailed REC calculation can be evaluated against the transparent basis.
A binding basis with informative value
In the past, historical quotes were used as reference for the price plausibility checks and negotiations. The focus was on the price. Other criteria could hardly be compared. The entire concept must be spot-on to be able to meet the high standards of Mercedes-Benz Cars: price plus quality, technology, quantity, delivery date. REC reveals this entire cost structure – and consequently allows comparisons for the first time.
He who knows the optimum is able to use it for orientation,
Planning, Cost Engineering, and Procurement attach particular importance to understanding the individual cost structure of the business partners. Item after item is compared to the REC (Reference Calculation) target curve. The supplier receives concrete information about deviating bid figures. Be it different commodities, process changes or more productive equipment: The supplier is able to use the levers as preparation for the final negotiation and for long-term optimizations of his operations. But REC also works in the other direction: If the supplier concept offers, for example, technical improvements, they can be incorporated into the planning.
The performance and competitiveness of Mercedes-Benz Cars is particularly also determined by the suppliers. That is the reason why all parties involved are only able to adapt to the constant changes of the automotive market together. REC supplies the sustainable basis for long-term successes.
REC is an effective tool for ensuring continuous improvements in the entire supply chain,