During the presentation of FY2018 financial results and the second phase of its strategic plan ‘Push to Pass’ for 2019-2021, Carlos Tavares, Chairman of the Managing Board of Groupe PSA, announced that the Peugeot brand was chosen for the North American market and Citroën for India. Accordingly, in early April, Citroen, the brand that is celebrating its centenary this year, was introduced in India.
Citroen India will launch the locally-produced models with localisation levels up to 98 percent, to be Indian in India, by the end of 2021. It also intends to export cars, engines and transmissions to various parts of the world to utilise its capacity prudently. The company claims that it is on track to meet its objective of introducing an innovative range, starting from the new Citroën C5 Aircross SU. It will be the first of many differentiating products from the vehicle manufacturing joint venture of Groupe PSA with the CK Birla Group in Tiruvallur, Tamil Nadu, India. The production of powertrains will be at the PSA – AVTEC Powertrain JV in Hosur, Tamil Nadu. Soon after the official launch of brand Citroen in India, the company also kick-started its vendor development initiative.
T Murrali of AutoParts Asia caught up with Guillaume Ruffino, India HUB – Purchasing Vice President, Groupe PSA, for an interaction. “There are good suppliers in India who are able to deliver high quality products without foreign partners. We want to jointly develop with suppliers to make sure that the part we produce will have the best price versus performance, and the highest quality,” he said. Edited excerpts:
Q: One of the key decisions taken by you was to source even major aggregates including engine, gearbox, cabin and axles, locally. However, it is perceived that getting components at your expected quality is a big challenge. How do you plan to manage that?
Ruffino: We are working for Citroen and also for all the brands of the PSA Group. As a buyer I am going to buy the parts for all the plants worldwide. Of course Citroen is being launched in India and the first challenge is how to ensure quality. We want to make sure that the quality of the parts is high.
Q: When did you actually start the vendor development process?
Ruffino: We have an ongoing process of development with local suppliers since a few months. We are now looking at ‘exporting suppliers,’ those who would export to our plants across the world. Each time we select a supplier the development starts and continues for a few years.
Q: Usually it takes about four years to develop a supplier. So with the short lead time available would you be able to launch by 2021?
Ruffino: It depends on the parts. I do believe that by the end of the year we would export some parts from the suppliers here; easy items like forgings, castings, stampings and body parts which can be developed quickly.
Q: What are the criteria to select suppliers? Are they based on cost, technology and logistics?
Ruffino: Corporate Social Responsibility (CSR) is the first. I cannot select a supplier who does not match with our CSR criterion. That is the key for us. Besides that quality is a must. We expect the same quality level from our Indian suppliers as that of our global providers. We will negotiate and adjust price with past performance.
Q: When did you begin auditing Indian suppliers on-site covering several functions including R&D, engineering, production, quality and logistics? When did you give them the green signal?
Ruffino: At the beginning of the process in 2018 we started our activities here with a lot of audits that are going to continue. For the new suppliers we have something called NSA (New Supplier Assessment). It’s a simple audit to check all selected parameters.
Q: You have sourcing experience with many companies. What is new in this process when compared with similar assignments taken up by global OEMs in India?
Ruffino: I strongly believe that Indians and Indian suppliers are more agile and smart than others. That’s why we are here. First of all we need to have a mature industrial base with a new way to design the parts jointly with the suppliers; this is very important for us. Most of our competitors, and even we a few years ago, were coming here with standout technical specifications, instructing the supplier to just make the parts. We don’t want to take that route now. We want to jointly develop with suppliers to make sure that the part we produce will have the best price versus performance, and the highest quality.
Q: Would that not be a time-consuming process?
Ruffino: It might be but it’s very valuable; worth spending time on.
Q: So how many Tier-1 suppliers would be there in your company’s fold before you begin production? 190 to 230 is the average in India.
Ruffino: I don’t know but we will try to get as many as we can. We invited 250 suppliers to our first summit. Besides that we have identified hundreds of other suppliers that meet our needs.
Q: When multinationals set up shop here they bring with them their preferred vendors. Would you also be bringing some companies from France to India?
Ruffino: My first target is to find suppliers who are already here that produce good products at a competitive price. If I find them here I will not bring anybody from France. We will be working to export from India though we do have good suppliers in Europe. We don’t see the need at the moment to bring in suppliers from France to India.
Q: Logistics plays a vital role in terms of weight and sometimes volume of the product. What percent of your suppliers would be closer to the plant as logistics cost could be a deterrent?
Ruffino: The only criterion we have is the total landed cost. That’s how we are going to select the suppliers, whose total landed cost is competitive; this of course takes into account all other multi-level costs such as logistics cost, material, added value etc.
Q: Don’t you think transit damage is also another factor to be considered as it would result in PPM levels going high?
Ruffino: We consider that for some sensitive components we have to increase the packaging. But that could result in costs going up. We have to strike a balance before coming to a decision. Of course quality is a must. We will not compromise on quality.
Q: When a component is localised, the general tendency of any global company is to make it as per the quality requirements of the local market. This is done to match the price points. However, some companies hope to match the quality levels of the components used by their plants in Europe as in your case. What is your plan; will you match the Indian market or the global?
Ruffino: As I said before, quality is a must. We will not degrade quality at any level. It has to match the requirements. Then there would be a trade-off between price and performance of the components. So we have to work at getting the best value for the best price. However, quality is never going to be compromised. Price and performance have to be worked out jointly with the suppliers.
Q: There will be a trade-off – as quality increases, costs rise. You are pulled apart, so where do you actually draw the line?
Ruffino: Making a car is a matter of compromise between these two segments. Sometimes we might have to ignore, for example, aesthetic or attractive bumpers so that we could go in for better seats. So any compromise should be customer-centric; the C-cube that stands for Cool, Comfort and Clever, applies here.
Q: What are the likely components and systems that Groupe PSA will source from India?
Ruffino: It would depend on the suppliers we find here as also the business case. We will have to take it case-by-case.
Q: How do you want relationship to be between your vendors and you – transactional or beyond?
Ruffino: In the automotive industry there is nothing transactional; everything is built on long-term relationships to be in a win-win situation. There has to be a fit between strategy and products with our best suppliers. We will not follow ‘manufacture to print’ but it will be joint development and manufacturing between us and suppliers.
Q: That means you would hand-hold the vendors for sometime while developing jointly?
Ruffino: Yes, certainly.
Q: OEMs coming to India usually prefer Tier-1 companies that have partnerships with a foreign entity. What is your plan?
Ruffino: As a buyer I don’t like preferred company; I like competition.
Q: What I mean to say is that when multinational companies come to India they look for suppliers who have foreign partners because they feel that this would ensure good quality. This is the general perception. What do you feel about it?
Ruffino: I am sure there are good suppliers in India, without foreign partners, who are able to deliver high quality. I really think that, as it is the effect of my travelling and meeting people here. Of course it is important to find and source the right suppliers.
Q: Would you train your suppliers on-site, not only in the technologies but also in PSA Groupe’s specific processes and systems?
Ruffino: We use a concept called ‘Monosukori’ which is a global approach where we put everything in the same room like industrial parameters, R&D, logistics, etc; see the global value chain and try to optimise it, not just one part but across the complete value chain. Also, the ‘Extended Company’; it’s a concept that is very interesting because we usually look into PSA to see what can be optimised. We do exactly the same with suppliers. What is in between we never optimise. Extended Company makes use of the global approach to try and energise the total value chain. That is Monosukori; it’s very interesting and very powerful. We have used it for four to five years now.
Q: Could you share some of the significant results achieved through Monosukori?
Ruffino: It is a daily work. The first point is to look at the flow; manufacturing flow and logistics flow. When we look at these, across suppliers at PSA plants, we do find a lot of results. Sometimes what is good for PSA is not good for the suppliers, and vice versa. It is part of the ‘Push-to-pass’ strategy. It is reaping fruit because operating profitability has increased by 8.2 percent.
Q: Are you planning to work with raw material suppliers as they are the weakest link in the value chain?
Ruffino: It’s an important point; we have some technical specifications which are done with the materials we know in Europe. The first thing is to find out what materials are available in India for our site, see if it is compatible and, if not, make our specifications well-matched with them. It is a challenge for engineering; I don’t want to impose on suppliers the use of specific materials.
Q: Some companies work on DMU (Digital Mock-Up) process, which covers all aspects in terms of design for manufacturing, assembling and serviceability. Since you are starting from scratch, what kind of methodology will you use?
Ruffino: It’s all about having joint development with our suppliers. The supplier should bring everything to the table – material, competency, process – to produce parts that meet all the parameters, with good quality at the right cost.
Q: In addition to product and process capabilities, a supplier needs management skills. What kind of support do you give in this which would benefit you also in the long run?
Ruffino: I am not much concerned about the skills in India as you have very good engineers, a mature supplier base and industrial development. Suppliers here have been delivering for dozens of years, sometimes longer than suppliers in Europe. We will support and help them as long as we can.
Q: How do you compare and contrast the supplier development initiative in India with that in some other countries of your choice?
Ruffino: From a supplier standpoint it is almost the same. It is more about the attitude of PSA. We want to have a different attitude here; we want to be much more humble, learn from the experiences of these suppliers and try to adapt. That is the main difference. We will adapt; that’s the challenge.