Daimler Supplier Strategy
Head of Procurement Stark: Growing Strength of Chinese Suppliers
The new member of Daimlers Board of Management Wilko Stark intends to strengthen cooperation with the international supplier network. Above all, however, the Chinese partners have a new special role to play in future goals.
Since October 2018 Wilko Stark has been the boss of more than 1,800 employees in the Procurement and Supplier Quality department at Mercedes-Benz. In his role as divisional director, he presented himself to the press for the first time in January. Stark, who as chief strategist also helped shape the manufacturer's CASE strategy, also sees a clear challenge for his Procurement department in all of these areas - connectivity, automated driving, shared mobility and electric mobility. He made this clear by allocating 20 billion euros to battery cells, to which Daimler had committed itself - in order to secure its own electrical offensive. This was necessary in order to realign the fleet by 2020: To this end, ten pure electric cars and more than 130 electrified vehicles are to come onto the market. These include plug-in hybrids and also 48-volt concepts.
For 2025, Stark expects a drive mix comprising 15 to 25 % electric vehicles. This is the result of legislation and demand. Stark emphasizes that a "controlled transformation process" towards electric mobility is underway at Daimler. However, the framework conditions have also changed in the process: According to Stark, the prices for battery cells dropped: According to the Procurement Manager, a "bottom line" has been reached.
Daimler: Great Importance of Module Strategy and Construction Kits
The main task of his department is to become even more efficient. “There is more content in the car, but the vehicles have not become much more expensive. We have to keep an eye on the costs," says Wilko Stark. This is also a clear hint in the direction of automotive suppliers. They are to be dealt with even more intensively and asked about construction kits and innovations: "The module strategy and the kits have gained a new meaning," says Stark. Daimler intends to address trade conflicts, such as the one between China and the USA, more strongly by purchasing at the production site. Particularly in China, networks with local suppliers are being expanded. Stark sees this company in a leading position in the new fields of technology: "They lead the world in battery cells, cell chemistry, connectivity and digital services. We don't have any suppliers in Europe who can do that, and US suppliers can't do that either." Especially the cell suppliers there have gained "dramatically" in importance.
Suppliers' Share of Value Added Will Increase
Daimler's e-mobility strategy, however, remains clearly in line with its strategy of purchasing additional battery cells and the powertrain. This makes e-vehicles even more expensive than combustion engines at present. However, the aim is to bring the cost structures up to the same level as that of combustion engines. Stark emphasizes that individual mobility should not become more expensive. Suppliers currently account for 70 % of value added. According to Stark, the purchase of battery and drive components will further increase this share.
But how does he and his team manage supplier management in concrete terms? On the one hand, Daimler is increasingly adopting a global approach. In addition, Stark intends to make its business with suppliers more flexible by bundling contracts. In the background, he wants to increase the e-share and reduce the share of combustion engines in production. "This must also be implemented at the supplier level. This supposed to be a dynamic process," says Stark. To this end, the modules would have to be exchanged: This means that suppliers are to increase the proportion of modules for e-vehicles and at the same time reduce the number of modules for combustion engines.
Cell Chemistry as a Cost Driver
In addition, the reduced product lifecycles will lead to greater flexibility. According to Stark, it is no longer sufficient to buy once during a cycle of seven years. The best example is the topic of cell chemistry. Due to the leaps in development, this technology must be updated several times during its lifecycle. At the same time, cell chemistry is the biggest cost driver. Against the background of battery technology, sustainability is also a crucial criterion for Mercedes purchasing in its business relationships with suppliers - because they have to disclose the entire supply chain, as the 700 quality engineers in Stark’s team check it for its sustainability. All in all, the new Mercedes head of purchasing also sees a shift among the top suppliers, which results from the purchasing volumes. "We're buying tens of billions of dollars in battery cells from new suppliers. That wasn’t the case before. This also transforms the supplier landscape."
This article was first published by Automobil Industrie.
Original: Christian Otto / Translation: Alexander Stark
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