Procurement


The repercussions of the financial and economic crisis presented Procurement with fresh challenges in fiscal year 2009. Sliding sales at automobile manufacturers had a knock-on effect on suppliers, prompting scores of insolvencies in this sector. At the same time, government incentive programs were approved that caused a shift in unit sales in the individual vehicle segments. These effects directly influenced the supply of procured components. Other issues of importance in 2009 were the systematic development of new procurement markets and the worldwide implementation of the sustainability concept in supplier relationships.

Supply situation for procured components

Supplies of procured components in 2009 were affected in no small measure by the difficult economic climate worldwide and the government support measures taken to stabilize the global economy. In many countries, the unit sales in the luxury vehicle segments were particularly hard hit, plunging dramatically in some cases. This was countered by an equally steep increase in sales figures in segments comprising smaller vehicles with simple equipment features – a development attributable to subsidy programs as well as a change in cost and environmental awareness. Furthermore, in many cases component supply became extremely critical due to the large number of bankruptcies among suppliers.

These trends led to constant change in the Group’s component requirements throughout the year in terms of volumes and mix. In spite of these challenges, the component and vehicle plants of all Volkswagen Group brands received a steady supply of parts on schedule during 2009. This was also the case at the production facilities in China, which had to contend with a sharp rise in demand. The fact that this succeeded is thanks in particular to the systematic improvement in processes, especially in the areas of capacity, requirements and procured component management within our procurement organization. Intensified integration of processes with the other divisions involved also bore fruit. We plan to continue this successful approach so that we can cope with new tasks as well.

Systematic development of new markets

The new production facilities in India, Russia and the United States will provide fresh opportunities for Group procurement. By pushing local procurement of components, we secure cost advantages in these new growth regions, which enables us to stay within budget.

To increase our share of value added generated by locally procured components in growth markets, we rely on what is called radical localization; in other words, we try to find economical supply sources for raw materials in the relevant regions at an early stage in the process and in doing so optimize costs. Here, we work closely with the Technical Engineering and Quality Assurance divisions. Through targeted radical localization we are raising the proportion of material procured locally.

We also make intensive use of globally competitive procurement sources for our European vehicle projects. This enables us to leverage synergies from local production for exporting components and progressively reduce material costs in Europe without compromising on quality.

In this context, procured component management is an integral part of our international programs. Suppliers at the individual Group sites are supported by regionally active teams both in radical localization in the country in question and when exporting the components to Group production facilities in other countries. We also use the services of a supplier management team that together with Quality Assurance is responsible for training local suppliers.

This approach is helping us to optimize cost targets for new vehicle projects in the individual regions and achieve a globally competitive level of procurement.

Sustainability in supplier relationships

The topic of sustainability in supplier relationships is firmly embedded in the processes of the Volkswagen Group. Procurement’s goal is to integrate the values of environmental protection and the perception of social responsibility as defined in the corporate policy into supplier relationships. The concept of sustainability in supplier relationships comprises four main pillars: sustainability standards for suppliers, an early-warning system to minimize risk, transparency in the procurement process, and finally supply monitoring and development.

All procurement staff have been briefed on these topics and sensitized to shortcomings as well as potential for improvement at suppliers. By doing this, we have created the basis for sustainable development and continuous enhancement of procurement processes in the Company as a result. Time and again, our responsibility as a partner along the value chain presents us with new challenges such as deciding on the direction of investments, the use of resources or the promotion of product- and process-based innovations.

Since 2008, we have implemented the concept in all brands and in all regions in which the Group is active. Prior to this, a pilot project at VW Group China, in which the topic of supplier training was also an important element, was successfully completed. Using the experience gained in this project, we set up a global network for sustainability in the procurement organization and developed action plans for the future. Another supplier training project was implemented in India in 2009. Intensive networking and regular interaction between all brands and regions are essential if we are to integrate all our business partners throughout the Group into the concept.

Moreover, through its involvement in the “The European Alliances for CSR” initiative, Volkswagen is actively championing more intensive integration of the sustainability topic at a European and cross-industry level.

Purchasing volume

In 2009, the Volkswagen Group’s purchasing volume decreased by 6.3% year-on-year to €70.7 billion. The proportion attributable to German suppliers was 41.9% (48.0%).

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PURCHASING VOLUME BY BRAND AND MARKET

 

 

€ billion

 

2009

 

2008

 

%

*

2008 adjusted.

Volkswagen Passenger Cars

 

45.0

 

44.5

 

+1.3

Audi (incl. Lamborghini)

 

14.3

 

19.8

 

–27.5

Škoda

 

4.2

 

5.0

 

–17.2

SEAT

 

2.7

 

3.2

 

–17.0

Bentley

 

0.2

 

0.6

 

–60.2

Volkswagen Commercial Vehicles

 

1.5

 

2.3

 

–35.4

Scania

 

2.8

 

 

 

Volkswagen Group

 

70.7

 

75.4

 

–6.3

Europe/Remaining markets*

 

49.4

 

59.0

 

–16.3

North America

 

3.2

 

3.0

 

+8.4

South America*

 

5.4

 

5.4

 

–0.3

Asia-Pacific

 

12.7

 

8.0

 

+58.2

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