Strategic realignment of Procurement and Supplier Quality: Mercedes-Benz Cars drives the CASE transformation forward with the international supplier network

January 28, 2019 by Mercedes-Benz

Mercedes-Benz EQC |combined power consumption: 22.2 kWh/100 km; combined CO2 emissions: 0 g/km*, provisional figures

·The implementation of the CASE strategy is crucial to the success of Mercedes-Benz Cars.

·Wilko Stark, Member of the Divisional Board of Management of Mercedes-Benz Cars for Procurement and Supplier Quality: 'Procurement makes a significant contribution to the implementation of the CASE strategy at Mercedes-Benz Cars by working together with suppliers at a very early stage in the development of innovations. After placing an order for battery cells for 20 billion euros to safeguard our electric offensive, we are taking further steps at Procurement and Supplier Quality to continue pushing forward with the transformation of Mercedes-Benz Cars.'

·Procurement is addressing the following core issues: Together with the supplier network, Mercedes-Benz Cars is driving CASE innovations forward, further expanding the international supplier network and creating greater planning security in the supply chain through increased flexibility. Together, the partners achieve more efficiency by means of technical innovations without sacrificing sustainability.

Stuttgart – Mercedes-Benz Cars is taking the next step in the implementation of the CASE strategy and is making its supplier network even more international. Together with the suppliers, procurement is driving the innovations of the future. The company already plays a leading role in all four areas of Connectivity, Autonomous, Shared & Services and Electric.

Wilko Stark, Member of the Divisional Board of Management of Mercedes-Benz Cars for Purchasing and Supplier Quality since October 2018, is implementing the future trends that he identified as chief strategist: 'Procurement makes a significant contribution to the implementation of the CASE strategy at Mercedes-Benz Cars by working together with suppliers at a very early stage in the development of innovations. After placing an order for battery cells for 20 billion euros to safeguard our electric offensive, we are taking further steps at Procurement and Supplier Quality pushing forward with the transformation of Mercedes-Benz Cars.'

Procurement is addressing the following core issues: Together with the supplier network, Mercedes-Benz Cars is driving CASE innovations forward, further expanding the international supplier network and creating greater planning security in the supply chain through increased flexibility. Together, the partners achieve more efficiency by means of technical innovations without sacrificing sustainability.

Purchasing drives CASE innovations forward with the supplier network

Procurement and Supplier Quality at Mercedes-Benz Cars works closely with suppliers in the CASE fields and drives tomorrow's innovations. Through permanent innovation scouting in the existing supplier network and with new players and startups, innovative ideas are generated over the entire lifecycle for hardware, software and services. The aim is to bring these innovations into Mercedes-Benz vehicles even faster. With extensive orders for battery cells until the year 2030, another important milestone has been set for the electrification of the future electric vehicles of the EQ product and technology brand. Together with supply partners, this will ensure that the global battery production network is supplied with the latest technologies today and in the future. Thereby, the expansion of the supplier network will be driven forward.

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Expansion of the international supplier network

Mercedes-Benz Cars is continuing to expand its international network of suppliers and is systematically pursuing its strategy of purchasing wherever its vehicles are produced. By intensifying its localization strategy, Mercedes-Benz Cars is making itself more independent of political developments such as trade conflicts. 'At Mercedes-Benz Cars, we generally aim to increase the degree of localization wherever we produce. A central building block for this is the local proximity of suppliers to the production plants, so that parts can be produced and called up almost synchronously with production. We are already working with many global partners to achieve this. We give local and new partners the opportunity to position themselves with us internationally,' says Stark. In China to date, approximately 300 local suppliers have been successfully developed. The proportion of local sourcing for production at the US plant in Tuscaloosa is higher than the current requirements in the country and is scheduled to be significantly increased over the next five years.

Flexible purchasing at Mercedes-Benz Cars

Growing flexibility in the supplier network is required not only by the transformation to electric mobility, but also by volatile markets, by Mercedes-Benz Cars' wide product range with more than 40 models, and by the high variance of ever new functions. 'We work in close partnership with our suppliers so that we can meet individual customer requirements flexibly, also with short-term change requests. Together with our partners, we have made our supplier network more flexible in order to compensate for fluctuating volumes. We are not cutting back on Mercedes-Benz top quality,' says Stark.

A prerequisite for supplying the flexible Mercedes-Benz Cars production strategy, which can switch between conventional and electric vehicles, is an equally flexible supplier network to supply the Mercedes-Benz plants. By bundling orders for components for conventional and electric vehicles with the same supplier, for example for seats or head units, it is possible to react flexibly to customer demand and switch between the drive technologies. This provides greater planning security for suppliers and for Mercedes-Benz Cars. Procurement and Supplier Quality helps the supplier network to align itself flexibly and efficiently with the future requirements.

More efficiency through partnership-based target-cost achievement

Another lever for greater efficiency is technical innovations that are developed jointly with suppliers. 'Our global supplier network makes an important contribution to value creation, quality and innovation. By means of early integration with continuous improvements along the value chain, it makes a decisive contribution to the overall business success of Mercedes-Benz Cars. In the future, we intend to make even greater use of our suppliers' modular systems for parts that do not differentiate our brands. Our suppliers therefore have a significant influence on the development of our component costs,' says Stark.

The cooperative partnership between Mercedes-Benz Cars and its suppliers is characterized by a common understanding of product and production quality, security of supply, competitive prices and innovative strength, as well as by the consistent implementation of our sustainability claim.

Sustainable raw-materials supply

Sustainability is one of the basic principles of Daimler AG's corporate strategy and at the same time a benchmark for corporate success. This also includes the responsible procurement of raw materials. Daimler has therefore developed a systematic approach to respecting human rights, its Human Rights Respect System. With a risk-oriented and systematic approach, the system makes the issue of human rights manageable also along complex supply chains.

However, vehicle production naturally requires a high volume of materials. That is why one of our development focuses is on keeping our demand for natural resources as low as possible. Above all, the company tries, together with its suppliers, to limit the use of raw materials with limited availability at an early stage of development. Daimler has been investing in resource-efficient technologies and manufacturing processes for batteries for many years. At the same time, it is working with its suppliers to further reduce the cobalt content. The current mixture of nickel, manganese and cobalt could soon be a thing of the past, as cobalt is to be largely replaced by nickel in the short term. From 2025 onwards, so-called post-lithium-ion technologies, which do without nickel and cobalt altogether, are expected to have been technically tested to the point where they can be used in vehicles.

In addition to the economical use of resources, the processing of components and the recycling of raw materials play an important role. Daimler AG is actively involved in the research and development of new recycling technologies in order to implement the recycling process chain and secure the raw materials required for electric mobility in the future. Knowledge about the recycling of lithium-ion batteries has already been gained in many research projects and in cooperation with suppliers and material-disposal partners. Innovative recycling concepts have been developed to enable the high-quality recovery of valuable components and materials.

About Procurement and Supplier Quality at Mercedes-Benz Cars

Purchasing and Supplier Quality at Mercedes-Benz Cars is responsible for an annual purchasing volume in the double-digit billion euro range and is responsible for purchasing production materials and parts for Mercedes-Benz and smart passenger cars as well as for Mercedes-Benz brand vans. Approximately 1,800 employees worldwide – at the central location in the Stuttgart region, at the regional hubs in China, the United States, South Africa and Argentina, as well as in other purchasing offices at a total of ten locations – support around 2,000 suppliers worldwide with regard to all commercial and quality aspects.