Pay-on-Production

The English term "pay on production" ( PoP) means payment per unit of production, which is the name for a specific operator model.

Description

In operator models the customer buys neither a production facility nor least, they, but relates from a mostly organized by the equipment manufacturer manufacturing the necessary parts. As an example, tire fitting can be used: The vehicle manufacturer does not buy tire assembly plant but expects the operator of the system ( their manufacturers, logistics service providers, ...) a sequence- oriented delivery of the wheels in all variants, sometimes five, sometimes four plus spare wheel, sometimes only four. It will be paid only for the actual built-up wheels.

In PoP, the idea is expanded: The whole final assembly line is driven by an operator. The OEM pays a negotiated price made ​​only for the finished vehicle. The concept was developed at Ford in Cologne, where the entire assembly line was handed over to the owner as operator. 2008, there current Fiesta production is considered the most productive in the world ( measured in assembly hours per vehicle). However, in the band employed for the most part still Ford employees. It is the kind of a pay- more from the perspective of maintenance management: Operates production the plant or the maintenance? Consequently, PoP is essentially a financial model and no special work organization.

In PoP the OEM costs arise mainly as variable costs, financing fixed costs lies with the operator and throws, as it is in which is usually medium-sized, special problems. The result is generally a significant shift of the business risk away from the back to the OEM operator. Specifically, the degree of risk transfer from the respective contracts depends in particular the agreed purchase commitments and scales.

Given the success in Cologne, the concept was pursued not only for the next Fiesta but should be implemented in other Ford locations., The latter succeeded, however, among other things, in view of a better financial situation at Ford again, not.

Background and rationale

In the first years of the twenty-first century, Ford had focused on the development of new models. For an investment in the modernization of the plant technology, the liquidity was exhausted. Conventional operating models, however, were also rejected because they had had the experience that when in such a ausgesourcten production parts production competence is permanently lost.

Pay -on -Production is under the objective, without liquidity available for investment yet to be able to produce with modern engineering technology and its own employees, without, however, that investment in the established under U.S. GAAP balance sheet shows up in some form and covered by the rating agencies.

For the supplier, it has been seen as advantages that

• The plant would not otherwise have been built,
• He receives the income from the CIP in Plant Maintenance ( OEM however the CIP in the production ) and
• He now has continuous access to the data of the system and can therefore very quickly improve its design and
• His competitiveness increased by the success of such a model.