Procurement

In 2008, the main challenges to our procurement activities were the sharp rise in commodity prices, the optimization of capacity and supply of procured components, as well as the development of new markets. As in previous years, our procurement activities concentrated once again on enhancing supplier management in an effort to ensure sustainable supplier relationships. We also extended the management system for procured components introduced in 2007 to other regions and countries.

Challenge of high commodity prices

2008 saw a continuation of the global increase in commodity prices. The already fast-paced trend accelerated particularly in the first half of the year, principally due to the spike in iron ore prices.

Volkswagen was quick to take steps to counteract the strain on the commodities market with specific strategies and is continuing systematically in this vein. The strategic orientation of our supplier portfolio will be the focus of attention in the future, with our local plants in India, Russia and the United States playing a key role.

Capacity and supply situation for procured components

The capacity and supply situation for procured components developed very encouragingly in 2008 and made us more flexible than in the previous year. This is due in no small part to the newly established planning and decision-making processes as well as to new systems installed throughout the Group for planning and safeguarding capacity. In spite of higher production volumes, the number of components in critical supply was reduced. We will continue to extend this successful strategy to ensure the flow of parts worldwide for future projects. It will be implemented at all locations – both existing plants and new sites that are under development.

Systematic development of new markets

The new production facilities in India, Russia and the United States will provide a double opportunity for Group procurement. Firstly, our local procurement activities allow us to identify cost advantages and cut costs in addition to complying with legal requirements (including local content requirements). Secondly, suppliers at these locations may prove to be a low-cost supply source for other regions as well. Both opportunities are being carefully reviewed in the procurement activities for the new plants. To optimize the cost of materials for our products in new growth markets, we make intensive use of these markets for production. One of the factors to be ascertained is the extent to which specifications can be adapted to local requirements. We also achieve a higher real net output ratio in these markets through radical localization; in other words, we try for example to find economical supply sources for raw materials in the relevant regions at an early stage in the process.

The C3 Sourcing (Cost Competitive Countries Sourcing) program systematically builds on these areas of action, aiming to harness the cost advantages in competitive procurement markets for European vehicle projects. This enables us to leverage and further expand synergies from local production for export while maintaining our quality standards. Procured component management in the various regions worldwide is an integral part of this program, supporting suppliers at the individual Group sites both in radical localization in the country in question and when exporting their components to Group production facilities in other countries. The C3 Sourcing program is thus instrumental in meeting cost targets for new vehicle projects at the start of series production.

  Download

PURCHASING VOLUME BY BRAND* AND MARKET

 

 

€ billion

 

2008

 

2007

 

%

*

Scania’s purchasing volume in 2008 is not included because of the initial consolidation date for Scania.

Volkswagen Passenger Cars

 

44.5

 

41.8

 

+6.2

Audi (incl. Lamborghini)

 

19.8

 

18.7

 

+5.5

Škoda

 

5.0

 

5.0

 

+1.7

SEAT

 

3.2

 

3.6

 

–9.3

Bentley

 

0.6

 

0.6

 

+3.8

Volkswagen Commercial Vehicles

 

2.3

 

2.3

 

+1.6

Volkswagen Group

 

75.4

 

72.0

 

+4.8

Europe/Remaining markets

 

58.4

 

56.7

 

+3.1

North America

 

3.0

 

3.2

 

–7.1

South America/South Africa

 

6.0

 

5.1

 

+17.8

Asia-Pacific

 

8.0

 

7.0

 

+14.7

Sustainability in supplier relationships

As part of the strategy of integrating the vision of sustainability into the processes and structures of the Volkswagen Group, it is the task of Procurement to transfer the values of environmental protection and the perception of social responsibility as defined in the corporate policy to supplier management. Besides its primary function of generating competition among suppliers and obtaining the best possible prices for products and services, Procurement must not lose sight of Volkswagen’s mission to protect the environment and respect international human rights. This can only be achieved through joint action with business partners.

It is therefore important to us that suppliers not only deliver flawless quality, but also comply with minimum environmental and social standards worldwide. To step up to the challenge of achieving sustainability in supplier relationships, Procurement developed a concept for integrating environmental and occupational health and safety criteria, as well as social rights, into the global procurement management system, based on a dialog with our business partners and support from the academic community. The concept comprises four main pillars: sustainability standards for suppliers, an early-warning system to minimize risk, acknowledgement of our standards by the suppliers together with self-assessment, and finally a monitoring and supplier development process. This concept has been embedded in our business processes since 2006 and increasingly used in our brands and regions since 2008. The corresponding pilot project in China marks the start of the implementation of the sustainability standards for suppliers in the Group’s regions.

Procured component management ensures quality

2008 saw the roll-out of not only the Passat CC and the new Scirocco, but also the sixth generation of the Golf. The very steep ramp-up curve at the start of production of the new Golf presented a particular challenge. Our project purchasing organization mastered this task in collaboration with the newly established procured component management, which comprises a team made up of Procurement and Quality Assurance employees. The idea of having a team of experts on hand to help in the supplier selection process was also extended worldwide last year to the other brands and regions and is now entrenched in our organizational structure.

Increased purchasing volume

In 2008, the Volkswagen Group’s purchasing volume increased by 4.8% year-on-year to €75.4 billion. The proportion attributable to German suppliers was 48.0% (49.7%).

Top
Deutsch | English
Print Manager
Mark this page for later printing or print all marked pages.
Download Manager
Collect files for a combined download
Compare Key Figures
Create your personal overview of important key figures.