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PRICING PROCESS

PRICING PROCESS. FAURECIA SOFT DIVISION 10/09/02. PRESENTATION AGENDA. 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS. 1. SCOPE OF THE STUDY

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PRICING PROCESS

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  1. PRICING PROCESS FAURECIA SOFT DIVISION 10/09/02

  2. PRESENTATION AGENDA 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS

  3. 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS

  4. NEGOCIATION • This period is caracterised by : • frequent interactions with customer leading to multiple offer scenario • the necessity to make accurate arbitrage between scenario • an engagement on a definitive selling price CONSULTATION • This period is caracterised by : • key technical/ industrial decisions • an engagement on the corresponding investments amount • an engagement on selling price objective which may be adjusted THE STUDY DEALS WITH THE EXCHANGE PRICE FOR THE SOFT DIVISION RFQ OFFER ORDER PRODUCTION PROTO PRS SERIE This period is caracterised by the necessity to deliver in costs, quality and time what was ordered by customer and accepted by ASBG. This period is caracterised by the necessity to deliver in costs, quality and time what was ordered by customer and accepted by ASBG This period is caracterised by the necessity to deliver in costs, quality and time what was ordered by customer and accepted by ASBG PROGRAM EXCHANGE PRICE Only Closed Order Closed Order and Open Order BP update Open Order with time evolutive Serie Exchange Price Quotation, as requested by program Business Plan (BP) SOP

  5. 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS

  6. 2.1. METHODOLOGY & APPROACH • Methodology • Define the scope of study • Describe and Analyse : • Soft Division Pricing Inputs and Sources • ASBG Business Processes impacting Soft Div. Exchange Price • Soft Division Exchange Price discrepancies • Formulate Recommandations & Next Steps • Approach • Focus on FAA Oracle vs Sotexo MVS price comparaison experience and 84 zoom • Interview key players in the ASBG Business Processes impacting Soft Div. Exchange Price • Review ASBG Internal Documentation related to Quotation and Exchange Price • Study Constraints • Limited time • Availability of interviewees

  7. 2.2. KEY PLAYERS IN THE ASBG BUSINESS PROCESSES IMPACTING SOFT EXCHANGE PRICE

  8. 2.3 ROLES & PLANNING JUIN JUILLET AOUT 26 27 28 29 30 31 32 FAA Price Comparison to Purchasing MVS • Compare FAA prices to Purchasing MVS on 64, 70, 74, 76 • Provide sources & keys for justification Zoom on 84 • Review of 84 Program • Compare 84 EPR with FAA Costing • Analyse of Exchange prices provided Audit on Pricing Methods Recommandations on the Soft Division's Methodology • Capitalize on FAA Price Comparison • Analyse existing process • Formulate recommandations Launch Meeting Convergence Meeting Validation Meeting

  9. 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS

  10. Customer Division Soft Division C AR C Program Control. Economic Man. Account Man. Program Man. Architect Studies Pilot Process Program Control. Indus Director Sales Admin. Purch. 3.1. BUSINESS PROCESSES , PLAYERS ROLES & RESPONSIBILITIES - FIRST OFFER Fin. Dir. Fin. Dir. Quotat Exp. Dir. Purch. RFQ Review R : RESPONSIBLE A : ACCOUNTABLE C : CONSULTED I : INFORMED I R Elaborate Macro Nom. & Define Functions I R Define Master Principles N On Line with Master Principles? C C C C Y I R C C Existing Std Function? Y Deal Dropped Out N I R C C Function is feasible ? Y N N N Accept Cust. Function I R C C Propose Alternative Solution? Y Y I R I R I Elaborate Macro Nom. I I I C R I Evaluate Investment, Tooling and start up costs R C C R Anologic Quotation N Quotation validated ? I C R C (Coiffe) Y Elaborate Initial BP & Selling Price A R C C N I A C Initial BP & Selling price validated ? R Y AR C C C C Elaborate Offer

  11. Customer Division Soft Division AR C Program Control. Economic Man. Account Man. Program Man. Architect Studies Program Control. Indus Director Pilot Process Sales Admin. 3.2. BUSINESS PROCESSES, PLAYERS ROLES & RESPONSIBILITIES - NEGOCIATION & ORDER Fin. Dir. Fin. Dir. Purch. Quotat Exp. Dir. Purch. Review Offer with Cust. N R : RESPONSIBLE A : ACCOUNTABLE C : CONSULTED I : INFORMED AR I New Customer Request? Y C AR I I I I I I Elaborate New Scenario Elaborate Detailled Soft Nom. Evaluate New Investment, Tooling and start up costs R C R I I Make New Anologic or Analytic Quotation R C R C N C R C I New Quotation validated ? (Coiffe) Y C C C R I Elaborate Soft BP and Soft Exchange Price N I I A R Soft BP validated ? Y Elaborate Consolidated BP & Selling Price I A R C C N Consolidated BP & Selling price validated ? I A C R Y AR C C C C Final Offer Deal Dropped Out Customer Order? N Y Production

  12. Customer Division Soft Division AR C Program Control. Economic Man. Account Man. Program Man. Architect Studies Indus Director Pilot Process Program Control. Sales Admin. Purch. Fin. Dir. 3.3. BUSINESS PROCESSES, PLAYERS ROLES & RESPONSIBILITIES - PRODUCTION Fin. Dir. Quotat Exp. Dir. Purch. Customer Order R : RESPONSIBLE A : ACCOUNTABLE C : CONSULTED I : INFORMED AR I Gap between Order & Offer / New Customer Request? N I Y AR I I I I I Elaborate New Scenario Elaborate Detailled Soft Nom. Evaluate New Investment, Tooling and start up costs R R I I C R C R Make New Anologic or Analytic Quotation C R C I New Quotation validated ? (Coiffe) N Y C C C R A I I Update Soft BP and Soft Exchange Price ? N Y I C A I C C R Update Consolidated BP? N Y R R Definite Exchange Price in GPAOs R Lack of Exchange Price

  13. 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS

  14. PRS : still PROTO • Zoom 84 • Serie : uncertain price • Zoom 84 • Serie : Product Modif • Zoom 84/ X76 4.1. EXCHANGE PRICE OVERALL DESCRIPTION Sources • CUSTOMER DIV • Financial Direction • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controller • Purchasing Manager • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controller • Sales Administrator • Purchasing Manager EXCHANGE PRICE

  15. ISSUES ORIGINS • High fabrication cost of a product due to : • Proto Tools • Non stabilized production process • Raw Material purchasing price at Proto price • Loss of internal stocks & work-in-progress • Invoicing of vendor stocks & work-in-progress • Exceptionnal Shipping • Contradictory with rules: • PRS Exchange Price should be egal to Serie Exchange Price • Modification don’t always follow required program process flow • Evolutions are often too frequent • Engineering and design department takes a long time transfering the information downwards, without any commercial valorisation before the modification is implemented • « Delivering at all cost » policy • PRS : still PROTO • Zoom 84 • Serie : uncertain price • Zoom 84 • Serie : Product Modif • Zoom 84 / X76 4.2. PRS PHASE CRITICAL ANALYSISSTILL IN PROTO

  16. EXTRA ORIGINS EXTRA ISSUES • High fabrication cost of a product due to : • Rework Direct Labor cost overrun (up to 4 temporary workers with 4 extra within Sotexo) • Plastic parts and inserts purchasing price at Proto price : as internal componant of 84 rear armest bought 19 € instead of 5 € • Destruction of 2000 foams before Top RO • Exceptionnal Shipping due to production transfer from Beaugency to FAA • Non respect of Top RO • The short time existing between 84 references DMS emphasises the effects of problems, as seen on B84 and C84 • PRS : still PROTO • Zoom 84 • Serie : uncertain price • Zoom 84 • Serie : Product Modif • Zoom 84 / X76 4.3. PRS PHASE CRITICAL ANALYSISSTILL IN PROTO -- ZOOM 84

  17. ORIGINS ISSUES • Exchange Price definitions is unclear : • Difficult to find simple rules to define and validate Exchange Price • Failure in Business process: • Difficult to identify a person accountable for Exchange Price • Many person responsible for Exchange Price • Price administrator purchase and sales not involve in business process • Difficult to identify a program purchasing accountable person • Non communication between GPAOs • Difficult to find methodology of exchange price communication and coherence validation • Serie Cost Prices only known 6 to 12 months after DMS • GPAO Exchange Price can be temporary • Difficult to recover the history of certain GPAO price • GPAO Exchange Price from the Purchase Order can be different from the Echange Price on the Invoice • Discrepancy on Exchange Price • Consequence : • Refusal of payment from JIT • PRS : still PROTO • Zoom 84 • Serie : uncertain price • Zoom 84 • Serie : Product Modif • Zoom 84 / X76 4.4. SERIE PHASE CRITICAL ANALYSISUNCERTAIN EXCHANGE PRICE

  18. EXTRA ORIGINS EXTRA ISSUES • B/C84 Exchange Prices temporary at 1 € for more than an year • Exchange Price awaited from the Program : • - Sales Price available on 15/05/02 • - Exchange Price only partly defined on 02/08/02. • - Cover decomposition still awaited by 15/08/02 • EPR disconnected from Cost Prices from FAA (07/2002), with main differences on Raw Material Total • PRS : still PROTO • Zoom 84 • Serie : uncertain price • Zoom 84 • Serie : Product Modif • Zoom 84 / X76 4.5. SERIE PHASE CRITICAL ANALYSISUNCERTAIN EXCHANGE PRICE -- ZOOM 84

  19. ORIGINS ISSUES • Difficult to find a economic up-to-date exchange product decomposition to determine the impact of an evolution • On purchasing price variation, the time required for the transfer of information downwards do not always allowed the standard one-month recovery period • Quotations sometimes done in a hurry, not validated by Quotation Expert Team • Informations transfer by engineering and design department could be delayed, with absence of any commercial valorisation before the modification is implemented • « Delivering at all cost » policy • No updating of BP • Exchange prices rarely evolve across its lifecyle • Loss of internal stocks & work-in-progress • Invoicing of vendor stocks & work-in-progress • Hidden cost due to modification: • Training • Exceptionnal shipping • Tooling • PRS : still PROTO • Zoom 84 • Serie : uncertain price • Zoom 84 • Serie : Product Modif • Zoom 84 / X76 4.6. SERIE PHASE CRITICAL ANALYSIS PRODUCT MODIFICATION

  20. EXTRA ORIGINS EXTRA ISSUES • ZOOM 84: • Product modifications accepted even after DMS to catch up with unfavourable negociation which leads to : • Reduce acting time between 2 modifications • Weekly frequency : control loss of the product perimeter over a certain period of time 2 months before DMS • ZOOM X76: • Incorrect GPAO Prices not closely related with Production Cost Price • ZOOM 84: • Proto Tools • Non stabilized production process • Rework Direct Labor cost overrun (up to 4 temporary workers with 4 extra within Sotexo) • Plastic parts and inserts purchasing price at Proto price : as internal componant of 84 rear armest bought 19 € instead of 5 € • ZOOM X76: • Lear BP unfavourable in comparison to real Cost Price • PRS : still PROTO • Zoom 84 • Serie : uncertain price • Zoom 84 • Serie : Product Modif • Zoom 84/ X76 4.7. SERIE PHASE CRITICAL ANALYSISPRODUCT MODIFICATION : ZOOM 84 / X76

  21. 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS

  22. OTHER OBSERVATIONS • PRICE ADMINISTRATION : • Several GPAOs exist and don’t communicate between each others • Temporary prices have been used in an abusive manner • Non locked system : Price can be changed with an activation date in the past • Endorsement leads to important retrocession • Price modifications on invoiced references leads to grave fiscal risks (due to VAT), especially for FAA • Exchange Price rarely evolves across the lifecycle of the product, on productivity profit and evolution of raw materials prices. • Exchange prices are linked with commercial prices and disconnected of real Costing Price and Market Price, despite instructions of ASBG. • Invoicing Problem : discrepancy leads to financing problems and loans • Stock & work-in-progress loss, exceptionnel shipping will remain financial hidden costs • Reasoning by variation can lead to error conservation and heritage, with a loss of history • Product modifications are accepted without any commercial negociation before the modification is implemented

  23. OTHER OBSERVATIONS • ORGANISATION : • Difficult to find a Flow chart • Unclear definition of tasks • Important turn-over that leads to a business historical loss • Lack of period of recovery of the functions, especially in program controlling • Difficult to identify a person or entity in charge of the arbitration between division • Center of profit position could increase misleading information flows. • MARKET : • No commercial lever within componant division, little external sales for bentchmarking and profit accessing for soft division.

  24. 84 HISTORY • 84 Program : complete manufacturer familly • B Berline 5 doors DMS : July 2002 • C Berline 3 doors DMS : July 2002 • J Scénic Monospace 5 seats DMS : March 2003 • L Berline 4 doors DMS : April 2003 - Turquie • E Convertible DMS : May 2003 • K Break DMS : May 2003 • R Monospace 7 seats DMS : December 2003 • H SUV 4x4 5 seats DMS : 2004 • S Company Berline DMS : 2004 • M5 B & C Sport DMS : 2004 • RSA gathered all potential automotive manufacturers and defined the 84 market price as the sum of the cheapest cost per componant from all of them. Faurecia got the market. • May 2001, engagement on an 84 collection price at 2784 Frcs (424.42 €) • Fixed foam seat engagement by Quotation team at 35 Frcs ( 5.34 €) over several years • New Negociation for Spanish Sales Prices : Spanish Sales Prices = France Sales Price – 1% • July 2001, new Account Manager on 84 program • Faurecia tried to negotiate an extra 300 Frcs (45.73 €) on 84 collection price. RSA refused. • New objective : sale at the highest cost any required modification

  25. 84 EPR OBSERVATIONS • Difficulty to compare decomposed Production Costing with detailled EPR : difference on calculation rules • EPR Margin different from Plant Margin : 20% vs 22% • EPR Transport lower than Costing Transport : 0.546 € vs 0.703 € for all B/C84 1/3-2/3 • Differences between EPR and Costing have mainly been identified on Raw Material Total • ex: B84 Authentic 1/1: • EPR RM = 49.89 € • vs Costing RM = 54.61 € • A first analyse suggests a variation on the widths and therefore the output • Difficult to find a economic up-to-date exchange product decomposition to determine the impact of an evolution

  26. 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS

  27. Define roles and responsibilities of the pricing contributors in the new organisation and defuse Flow of chart • Formalise exchanges and communication mode (push vs pull) between contributors • Establish arbitrage rules to prioritise programs quotation and business plans • Involve industrial key players ( pilot process) early in the program (before first offer) • Identify unique sources and the associated communication mode for : • 1. Material indices • 2. Inflations • 3. Product description • Make BP a true internal contract signed by component division director as for : • 1. Investment & Tooling • 2. Product Quotation • 3. Start up costs • and signed by program manager as for : • 4. Exchange Price • Establish common format across ASBG BPs and implement standards for start up costs evaluation • Harmonise quotations and calculation rules across ASBG RECOMMANDATIONS - BP

  28. All product modifications have to be quoted and negociated with the Manufacturer before the modification is implemented • Quickly define arbitration rules and organisation with Customer Divisions as discrepancies will keep on getting worst • Define accountability for exchange price • Harmonise exchange price decomposition and validation across the lifecycle of the product with Customer Divisions : • - define simple rules for exchange price calculation and validation for new references and purchase price variations. Soft purchasing decomposition methods could served as a base. • - appoint a person responsible for exchange price. • Define methodology for database price correction and block the system to avoid price changes with date of effect in the past, in particular limit endorsement,as it removes all responsabilities • Gather all references and exchange prices on a single database with coherence test • Determine as soon as possible the exchange prices of all new references (especially J84 PRS) • Avoid reasoning by variation, promote « Was / Will be » reasoning RECOMMANDATIONS - PRICING

  29. 1. SCOPE OF THE STUDY 2. METHODOLOGY & APPROACH 3. BUSINESS PROCESSES DESCRIPTION 4. EXCHANGE PRICE : ISSUES & ORIGINS 5. OTHER OBSERVATIONS 6. RECOMMENDATIONS 7. NEXT STEPS

  30. NEXT STEPS • Prioritize actions • Validate with ASBG objectives • Elaborate internal action plans with detailled phasing

  31. ANNEXES

  32. A1. BP DESCRIPTION A2. BP CRITICAL ANALYSIS : ISSUES & ORIGINS A3. SELLING PRICES A4. ZOOM ON 84

  33. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.1. BP OVERALL DESCRIPTION Sources Business Planning Tool • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  34. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.2. VEHICULE VOLUME Sources Vehicule Volume is an ESTIMATE based on Customer projections. Customer projections are filtered by group marketing. SOP and EOP are provided by Group Mktg • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  35. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.3. PRODUCT DESCRIPTION Sources • Product description comprises : • a product scheme and the different references • the mix of products: • the coefficient : number of component in the vehicule • the quota : faurecia market share on the program • the installation rate • The mix is provided by the program team • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  36. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.4. SELLING PRICES Sources • Selling price is either : • an ESTIMATE calculated based on profitability objectives: • Variable Margin = 45% • IRR = 20% • ROI = 32% • the customer price (which is an ACTUAL value provided by the Customer division sales manager or program financial control manager) minus a estimated % which reflects customer division commercial and study expenses • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  37. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.5. SELLING PRICE INDEX Sources • Selling price index is a either : • an actual value based on customer agreement • an input ESTIMATES based on a reference squeeze ( around 2%) • an CALCULATED input based on cost structure evolution • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  38. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.6. COST STRUCTURE • The cost structure comprises : • ESTIMATES from Soft Quotation Expert validated by the Pilot Process and Indus. Dir. or from Program Economic Manager: • the direct labor cost • the consolidated material cost • the plant overcosts • the depreciation for new and existing investment • the freigh out int. and ext. • CALCULATED inputs : • the SG&A costs represents 5% of the Turn-Over (mechanisms excl.) • initial costs are based on the ratio : overall initial cost (sart up, tooling, proto, ...) / Turn-Over • NOTA : Depreciation and initial costs at the P&L level are not derived from the cost structure and do not include depreciation from existing investment Sources • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  39. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.7. COST INDEXES Sources • Cost Indexes are not defined by Soft Division Financial Director, as it occurs in Frames Division. • There are standard elements taken from a program to another. • NOTA: • Inflation and productivity are objective ESTIMATES provided respectively by Frames division Financial and Industrial departments (Direct Labor & Specific DL, Plant Overcosts & Specific PO, Material Costs & Specific MC, Technical Depreciation, Freigh out internal & extrenal, SG&A, Financial costs) • Indexes evolution : • Material indexes are ESTIMATES from the Frames Financial Mgt Control Manager • Nominated purchases are indexed on Frames selling price index . • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  40. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.8. INVESTMENTS, TOOLING, START UP & PHASE OUT COSTS Sources • All this inputs are ESTIMATES provided by the Process Pilot and validated by Industrial Director • NOTA Tooling can be treated either as : • an investment if not sold to a customer • or, a product if sold to a customer. • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  41. Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments • Studies • Prototype & Eng A1.9. STUDIES & PROTOTYPES Sources All these inputs are ESTIMATES provided by the Studies Manager or the Studies Financial Control Manager NOTA: Studies & Prototypes are not charged to Soft Division. These charges may appear on a Business Plan in order to compare two scenario • GROUP MARKETING • CUSTOMER DIV • Account Manager • Program Manager • Architect / Studies Man. • Economic Manager • Program Controler • SOFT DIVISION • Direction • Financial Direction • Industrial Direction • Process Pilot • Quotation Expert • Program Controler

  42. A1. SELLING PRICE DESCRIPTION A2. CRITICAL ANALYSIS : ISSUES & ORIGINS A3. SELLING PRICES A4. ZOOM ON 84

  43. Calculation Rules • Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments A2.1. CALCULATION RULES CRITICAL ANALYSIS ORIGINS ISSUES Difficulty to find an entity within ASBG which is accountable for providing a unique source of calculation rules Discrepencies across ASBG. These discrepencies make it very unsafe and risky to quote a complete seat while pricing is based on a consolidated BP.

  44. Calculation Rules • Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments A2.2. VOLUME CRITICAL ANALYSIS ORIGINS ISSUES The customer is not defined as accountable for volume decrease. This impact is not transfered to the selling price and contracted with the customer. Different volume scenario based quotes are not systematically calculated and thus not included in the final offer. There is an uncertainty on the volume percentage granted to the Soft Division. A volume decrease has an important impact on the overall program profitability and is entirely assumed by ASBG.

  45. Calculation Rules • Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments A2.3. PRODUCT DESCRIPTION CRITICAL ANALYSIS ORIGINS ISSUES Difficult to identify an person within the program team, who is responsible and accountable for producing this information, updating it on a regular basis and letting other division systematically aware. The communication mode between the program team and the rest of ASBG (outlook repository) does not suit this type of information • The latest reference mix (coefficient, quota, installation rate) of products and corresponding sub functions (seat, backrest, base,...) within a car is not formally provided to the key players within ASBG : • in real time, • on a standard format.

  46. Calculation Rules • Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments A2.4. SELLING PRICES & SELLING PRICES INDEX CRITICAL ANALYSIS ORIGINS ISSUES • The sales manager : • either, has access to the soft cost structure as a reference price • or has an information on the soft part of the offer which is not provided by the appropriate source • The exchange format for exchange prices is not standardised The sales manager sometimes accepts selling price leading to soft exchange prices which does not match division profitability results. Soft Controlling hardly gets the exchange price along with its corresponding product scope from the Customer Division

  47. Calculation Rules • Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments A2.5. COST STRUCTURE CRITICAL ANALYSIS ORIGINS ISSUES • Nomenclature is missing, incomplete or not accurate. • Quotation Expert does not evaluate all the nomenclature. • Quotation experts has quoted a former nomenclature which has already been modified. • Quotation organisation and business processes at the ASBG level is unclear : • Difficult to find a person accountable for Quotation validation • Difficult to find a person accountable for Quotation realisation, • Difficult to find rules to prioritise Quotation between Programs Quotation sometimes wrong or not accurate

  48. Calculation Rules • Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments A2.6. COST INDEXES CRITICAL ANALYSIS ORIGINS ISSUES Inflation : Difficult to find an entity within ASBG wich is accountable for providing a unique source for inflations. Each Controlling Manager uses his own assumptions. Productivity : Those indexes are provided by Indus Directors and Financial Director on a division by division basis Purchases & Mat. Evolution Indexes : Difficult to find an entity within ASBG wich is accountable for providing a unique source for purchases index. Each Controlling Manager uses his own assumptions. • Inflation : • Discrepencies across ASBG • Productivity : • Discrepencies across ASBG Division in the indices based reference • Indices are not based on real value but on targetted value • Purchases & Mat. Evolution Indexes : • Huge descrepencies across ASBG • Persons responsible are not experts • These discrepencies make it very unsafe and risky to quote a complete seat while pricing is based on a consolidated BP which relies on severeral inconsistent indexes.

  49. Calculation Rules • Cost Indexes • Vehicle Volume • Selling Prices • Selling Prices Index • Product Description • Cost Structure • Start up / Phase out • Tooling • Investments A2.7. INVESTMENT, TOOLING, START UP COSTS CRITICAL ANALYSIS ORIGINS ISSUES • There is a lack in the definition of the detail content and perimeter of start up costs : • the evaluation of start up cost is generally overlooked, • the detailed content and perimeter (when does it begins and when does it ends) of a start up cost is not formalised and shared across division, • The evaluation of start up costs is not always done by the plant • The customer is not defined as accountable for SOP delays. • The impact of SOP delays from the customer is not evaluated, transfered to the selling price and contracted with the customer. The start up cost amount is not always clear, defendible and underestimated SOP delays due to customer increase dramatically Start up costs amounts

  50. A1. SELLING PRICE DESCRIPTION A2. CRITICAL ANALYSIS : ISSUES & ORIGINS A3. SELLING PRICES A4. ZOOM ON 84

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