Procurement risks and opportunities

The slowdown in global economic growth in the course of 2014 led to capacity utilization problems for suppliers in the different regions, particularly in South America and Russia. In Western Europe, demand for passenger cars stabilized in 2014; this had a positive impact on suppliers’ capacity utilization.

The trend in procurement is to bundle contracts to a greater extent and to ensure worldwide availability of uniform components. This is resulting in an increased need for financing and further consolidation in the supply industry. The Volkswagen Group’s procurement risk management system therefore assesses suppliers before they are commissioned to perform projects. Among other things, the procurement function weighs the risk of there being insufficient competition if it concentrates on a few financially strong suppliers when awarding contracts.

In 2014, the Volkswagen Group’s supplier base was much more stable than in past years.

Our modular toolkit strategy enables us to bundle volumes of vehicle parts and harmonize and synchronize requests for proposals and procurement processes. We systematically enhanced this strategy in the A0 vehicle class, allowing us to consolidate worldwide volumes into a single global request. In the process, we consider regional market requirements with the aim of maximizing customer satisfaction. This enables us to exploit transregional synergies while at the same time minimizing start-up risks within the Volkswagen Group, one-time expenses and internal process costs.

In addition, we have launched an initiative in procurement called “Volkswagen FAST – Future Automotive Supply Tracks” with a view to stepping up cooperation with our suppliers. We aim to carry out innovation and globalization projects faster and in a more focused manner than before.