Thursday, 20 November 2014

Mercedes-Benz boosts international buying

Mercedes-Benz Cars is expanding the international presence of its procurement organization with extended responsibility for supplier quality.

The aim is to safeguard the company’s Mercedes-Benz 2020 growth strategy from the perspective of procurement.

"We need the most innovative and capable suppliers worldwide. Our growth strategy offers them outstanding prospects," stated Dr. Klaus Zehender, divisional board member for procurement and supplier quality, Mercedes-Benz Cars. "Particularly in growth regions, we will develop capable and competitive suppliers as new partners. At the same time, our long-standing suppliers have the opportunity to grow along with our global production and procurement network."

The department for procurement and supplier quality at Mercedes-Benz Cars has some 1,400 employees worldwide and is responsible for an annual purchasing volume in the range of €2 billion.

The first Mercedes-Benz model benefiting from the increased international footprint is the new C Class; Mercedes-Benz's highest-volume model which is produced on four continents for the first time.

The production network consists of the German lead plant in Bremen, the South African plant in East London, the US plant in Tuscaloosa/Alabama and the Chinese production location BBAC in Beijing. The international plants are supplied to a high degree with parts from local suppliers.

"Procurement close to production makes an important contribution to reaching the economic goals. With the new C-Class, we have further increased localization in China and South Africa compared to the previous model, and in the NAFTA region we have reached a high localization ratio from the start," claims Zehender.

In China, the so-called local content ratio of vehicle and engine production at the BBAC plant in Beijing now stands at around 60 per cent. Until today, some 250 local suppliers have been successfully developed, and among the 10 largest Mercedes-Benz suppliers in China are three entirely Chinese companies.

The local content ratio at the US plant in Tuscaloosa, where the new C-Class is the first sedan built along with the traditional SUV production portfolio, currently stands at around 60 per cent, and local procurement in South Africa will further approach that dimension - calculated comparably - as well.

In general, Mercedes-benz claims there are no abstract target ratios for localization. Instead, the optimum for each part - in terms of parts price, logistic cost and tooling cost - needs to be achieved through local or global contract awarding.

The procurement locations in China, the US and South Africa are playing an important role in increasing localization. With further offices in Mexico and India the unit manage some 1,500 suppliers worldwide with regard to all commercial and quality-related aspects.

Their tasks and responsibilities were strengthened: as so-called hubs, their comprehensive scope extends from the identification and development of new suppliers, supplier management to the quality of purchased parts.

Zehender claims: "We are deepening our understanding of the local markets with the procurement hubs, and we are leveraging the expertise of our local partners - in China for example in our joint venture BBAC. Altogether, we will even better be able to utilize market potentials from components to raw materials."

The global sourcing strategy is based on three pillars: Each production plant is supplied by specific local suppliers (Local Source). Further parts are globally supplied from one central supplier location (Global Source), or from a supplier with locations close to Mercedes-Benz plants (Follow Source).

That way, the company claims, numerous long-standing partners from Germany are on board with the new C-Class as well. Examples include the high-end audio specialist Burmester is responsible for the premium sound system. Switching system specialist Marquardt produces all locking systems for the model. Mattes & Ammann is the global second-tier supplier of all fabrics covering ceiling and pillars. The exhaust system of the new C-Class, which can only be produced locally due to its dimensions and needs to be provided exactly in sequence, is supplied by Boysen. Boysen, based in the Black Forest, has built new locations to produce the systems close to the four C-Class plants and thus enlarged its own international presence.
                                    Opportunities for new partners

The Mercedes-Benz 2020 growth strategy and the increasing complexity of the business have been key aspects in the department's realignment including the integration of procurement and supplier quality functions.

Not only will the absolute unit figures on the basis of the existing product portfolio rise - by 2020 Mercedes-Benz will globally introduce more than 30 models, of which at least 11 without a direct predecessor – but further challenges include the diversity of vehicle and powertrain variants and the increasingly global presence with production capacities close to customers and markets around the world.

Zehender states: "In line with our growth, procurement volume will continue to rise. In addition, our architecture and module strategy unlocks higher scale effects on both our and the suppliers' side. That provides best preconditions for our partners to grow their business with us while we are systematically increasing the procurement organization's contribution to the overall success of the company."

Relevant factors in the relationship with suppliers are the four value drivers: technology/innovation, quality, reliability and cost.

"Our demands on suppliers include four areas: we expect innovative contributions which help us to safeguard our technology leadership,” further explained Zehender. “We achieve our uncompromising quality standards in close collaboration. The highest degree of reliability is needed for all parts supplies. And of course, a competitive cost position is always required as well - achieved primarily through continuous intelligent technological improvement”.

All suppliers are managed in a comprehensive manner - from tender, contract awarding, maturity validation during the ramp-up to series supply.

"Managing each supplier under just one roof gives us the utmost level of transparency so we can coordinate the cooperation as quickly as efficiently: with the full commercial and technological expertise of our team, for each part through the entire vehicle lifecycle, claims Zehender."

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