Alongside multiple model start-ups, the production launch of the Taycan was a key challenge in the reporting year. After all, this first all-electric sports car from Porsche represented uncharted territory for the company in a number of respects. Procurement also explored a number of options for optimising value chains, intensifying its networking efforts with suppliers and identifying new partners.
The changing framework conditions in the automotive industry, the pressure to innovate and the ever-shortening development cycles have triggered a new understanding of roles within Procurement. In keeping with the corporate strategy, the sports car manufacturer is constantly on the lookout for new inspirations and solutions. These are then developed at an early stage in tandem with suppliers, start-ups and partners. The Porsche Procurement department takes a Group-wide proactive approach to innovation management encompassing all the brands. The company engages in close cooperation with its strategic stakeholders to ensure early detection of trends and developments.
Procurement of production material and non-production material
Procurement continuously optimised the material cost per car throughout the reporting year, with Porsche involving its strategic partners in the process at an early stage as part of their trust-based collaboration. This approach made it possible to achieve improvements.
In 2019, Porsche’s material outlay amounted to 4,345 million euros (financial year 2018: 4,201 million euros). Procurement also played a decisive role in helping the company meet its objectives in terms of services and non-production material. The total investment volume in the reporting year amounted to 1,992 million euros. The increase on 2018 (1,858 million euros) was due primarily to large infrastructure projects, which additionally reflects Porsche’s policy of continued and sustainable growth to ensure the future competitiveness of the company.
The Procurement department focused its efforts on a number of production start-ups throughout the reporting year, with the Taycan an obvious priority. Not only was production of the new 911 ramped up, but the 911 Cabriolet was added to the 911 Coupé, the 911 Carrera and Carrera 4 were added to the 911 Carrera S and 911 Carrera 4S. The 911 Speedster, 911 GT2 RS Clubsport, 718 Spyder, 718 Cayman GT4 and 718 Cayman GT4 Clubsport also made their production debuts. The Cayenne Coupé, Macan Turbo and Macan GTS all enjoyed successful start-ups. Procurement also purchased a multitude of parts for all products and worked hand in hand with Development, Quality Assurance, Production and suppliers to ready the cars for series production.
The Taycan, which represented Porsche’s entry into the all-electric field, played a key role in the reporting year. Series production began in September 2019 at a dedicated new factory. The new technology and processes that are integral to electromobility have taken the company in entirely new directions in a number of areas. For the production of the Taycan, Porsche works with 350 suppliers from a number of different countries, who deliver over 15,000 purchased parts in total. Among the trailblazing innovations are 800 V technology, battery capacity of up to 93.4 kWh and electric drives featuring permanent synchronous motors and dual-clutch gearboxes. For Porsche, ensuring effective cooperation with all partners and identifying suitable new partners who share its commitment to sustainable operations is key to fostering innovations, introducing these to series production and further enhancing them.
Porsche Strategy 2025 Plus
In 2019, Procurement also took the opportunity to realign its strategy and build on the existing Porsche Strategy 2025. This includes new goals that have been collectively crafted by the departmental management. Procurement’s strategy focuses on five areas: software as a product, flexible organisation, shaping products and services, operational excellence, and culture and expertise. It is also aimed at intensifying cooperation between the different departments and brands. Employees were selected for the new strategy teams at a series of pitch days: over 70 candidates were invited to deliver a three-minute pitch, with the top 20 making the cut.
In response to changing framework conditions in the automotive industry and ever-shortening innovation cycles, Innovation Management has refreshed the concepts behind its various tools and processes over the last few years so as to remain a preferred partner for start-ups and suppliers.
Here are the tools at a glance:
– At each of the Porsche Supplier Tech Days, one of the company’s suppliers presents its innovative portfolio and selected pre-development projects.
– The Porsche Supplier Innovation Day provides the framework for integrating groundbreaking concepts from suppliers into the company’s operations at an early stage. In this way, suppliers can submit and pitch new concepts and innovative ideas relating to a specific topic.
– Under the stewardship of the Procurement department, Innovation Management successfully conducted two Open Innovation formats within the scope of the digital developer competition Porsche NEXT OI. NEXT OI is an innovation platform that is available 24/7 to start-ups and suppliers around the world for the purpose of developing digital applications. Similar Open Innovation formats are also being promoted for production-related aspects such as driverless transport systems.
– The Start-up Autobahn format enables fast, collaborative testing of new technology with young companies in the automotive sector. Since late 2019, Innovation Management in this format has led these efforts together with additional partners.
– These successful innovation tools from the Procurement department will be further expanded in the future. Its focus for the year 2020 will be on scouting new partners. In this way, Procurement will be able to establish further suitable collaborations and help a wide variety of innovations find their way to Porsche.
Sustainability rating for suppliers
Since 1 July 2019, the Volkswagen Group has used a sustainability rating for suppliers (of production and non-production materials) as a binding award criterion in the procurement process. In addition to the existing ratings for quality, development and logistics, the evaluation now extends to aspects of sustainability such as the attitude of business partners with regard to risks involving human rights, environmental protection, ethics and corruption. Orders will only be awarded to, and work will only be done with, suppliers who act sustainably and meet the sustainability requirements of Porsche. The sustainability rating is undergoing a step-by-step roll-out across all brands and regions. Suppliers must first complete a self-disclosure process addressing defined sustainability criteria and featuring a standardised questionnaire that is well established in the automotive industry. If the results of the self-disclosure are unsatisfactory, an on-site check of the production site ensues, which is carried out by an independent sustainability auditor. Should the audit result in sustainability risks being observed, this results in a negative assessment of the supplier and to their exclusion from future awards. The supplier can improve its sustainability performance at any time in order to fulfil the sustainability requirements and to qualify for future nominations.
Supply chain transparency
Together with suppliers, the Procurement department continuously analyses selected supply chains all the way back to the origin of the raw materials to identify all intermediary suppliers involved as well as to detect human rights risks and take measures accordingly. To this end, a number of workshops were held with Tier 1 suppliers in 2019, with efforts focused on pinpointing the key sources of emissions and potential areas for reducing CO2 emissions along the supply chain as well as the creation of transparency in the entire value chain. The participants worked together to define objectives, road maps and measures that would lead to improvements with regard to sustainability, as well as establish mechanisms to monitor the progress.
For the first time, blockchain technology was used to conduct a pilot project for identifying potential sustainability risks within the supply chains. This technology enables transparency to be increased along the entire value chain.
The digital technology was tested using the example of leather cockpit parts, with the pilot project comprising the origin and processing of the natural leather product through to Porsche’s own saddlery. This enabled comprehensive transparency to be generated regarding the value-creation partners involved and the potential supply chain risks. Following the successful conclusion of the pilot project, the procedure is set to undergo an initial practical test in collaboration with selected partners.
Given the technological change within the automotive industry as well as the increasing complexity and highly dynamic nature of all processes, it is necessary to make adjustments to risk management. This is a significant challenge for small and medium-sized companies in particular. Together with suppliers, the flexibility of the supply chain needs to be increased in order to address the increasingly dynamic circumstances. Additionally, the robustness of all partners must be ensured in order to take on the changes taking place in the sector. Supply chain risk management is implemented by Procurement in all supply chains with the goal of ensuring a reliable supply of production and non-production materials, as over two-thirds of value creation takes place at external partners.