How slick procurement put Vettel into pole position

Posted on November 25th, 2013 by

Photo of Sebastian Vettel celebrating winning the Brazilian Grand Prix

Starting Grid

Whenever a Formula 1 (F1) driver is interviewed – probably throughout history – he or she has always been at pains to thank and acknowledge the team effort required for a win. Usually they are referring to the countless engineers and technicians that work on the car itself and at the teams’ factory (keeping the vehicles running and developing components & technologies for future years’ models). However, behind them, is a supply-chain team which – like their cars – pushes the boundaries of what is possible.

The twists and turns

There are three aspects of procurement within the F1 industry, which make it such a challenging and rewarding prospect. The first consideration is the nature of any top-end technological market: high cost and low volume. All of us act like a buyer on a daily basis, e.g. we know that a multipack of crisps is more efficient to source, than nipping to the local gastro-pub for some hand-crafted potato wafers every lunch-time! By definition, not only is F1 using the most-expensive materials and technologies, it also often demands a bespoke variant of these items (hand-crafted potato wafers with a freshly made dip!).

Photo of a Red Bull F1 Car on a bend

This isn’t because F1 teams are fussy. Rather, because they are pushing every aspect of the car to the maximum and, at the lightest weight, every component becomes extremely specialised and often unique. For example, whereas a production car may utilise one grade of aluminium for all of its body panels, each F1 body surface will be doing a specific job, demanding a certain strength, heat resistance, flexibility etc. As a consequence, inventory control, negotiation and sourcing all require an aptitude far beyond the average. This is because, respectively, they involve managing high variance & high-value stock, low buying power, and working within a very small & specialised market-place.

All of the above would be a full-time headache for most procurement professionals, but there is one extra criteria, demanded by F1: flexibility. Due to the fast-paced evolution of the cars, new components and technical demands are coming on-stream constantly. The restrictions introduced a couple of years ago with regard to in-season R&D testing, have reduced this to an extent, but it has also focused the team’s efforts (to gain an advantage over their rivals) into a smaller time-frame. And of course, no-one can predict an on-track crash! Significant incidents are rarer these days, but when they occur, the demand for goods can be swift and hugely varied (depending upon the nature of the crash).

If a supplier wants to operate in this industry long-term, excellent response times and adaptability are non-negotiable. Indeed, suppliers can often offer the teams a lead-time significantly less than that of its raw materials (RM) and have the kind of production line flexibility & runs that would have Henry Ford turning in his grave! And remember, this is in a situation where the lazy approach to flexibility – high inventory – is not viable.

Photo of Aerodynamic Fins on a Red Bull F1 Car

The answer to the challenges above is the supplier’s relationships: with the team, its RM suppliers and its own employees. These have to be invested in and maintained to a high degree in order to manage the particular requirements of F1. The supplier’s sales team must know the F1 team extremely well, not only to maintain and secure business, but to enable them to preempt upcoming requirements and facilitate development work way in advance of any sales order. Likewise, merely expecting the RM supplier to understand and respond to every expedited request is unlikely to be successful or long-lasting. So, getting the right RM provider – one that has an understanding and attitude that far exceeds any contract clauses with respect to service – is as, if not more important, than cost. And of course, employees must be trained, communicated with, supported and very much on-board with the environment within which, they are a part.

Bring on the Champagne

And what is achieved when you meet all of these challenges? Like F1 itself, it can generate exceptional team morale and focus. The immediacy and real nature of the business (something you make one day can be on TV travelling at 200mph the following weekend) brings a clarity and focus seldom seen elsewhere. But perhaps the main satisfaction is in knowing that you – like the F1 drivers themselves – are operating at a level that most would struggle to comprehend, yet alone thrive at.