2017 Integrated Report – Departure into a new era

Purchase/procurement

Procurement contributes to Group targets

Our procurement ensures the economical, timely and quality supply of business units with material, capital goods and services worldwide. It also ensures innovative capability and sustainable success in the market and contributes to the implementation of strategy DB2020+ and of Railway of the Future .

Procurement identifies potential for savings in cross-functional cooperation with its internal customers and other Group divisions. This accomplishment directly affects Group results and supports our goal as a profitable quality leader. The rising wage trend continued in the year under review, although it dropped slightly overall. As previously, pressure on prices remained high, especially in the services sector. In addition, an increase in raw materials was recorded once again in the year under review, after dropping for several years. As this also affects the procurement market, fully developed Group commodity strategies and optimal awarding processes are required in order to achieve further monetary savings. The ongoing digitalization activities also contribute to the Group goal as a profitable quality leader. During the year under review, our procurement team has designed a digitalization road map designed to implement an increase in procurement efficiency, among other things. Electronic tender documents were introduced as a key component, enabling the availability and release as well as the automated adoption of tender documentation, regardless of location.

We can expect that the implementation of the digitalization road map will have a long-term positive effect on employee satisfaction, with the optimization of work processes it entails. A project to implement flexible forms of work in procurement was also introduced during the year under review.

This goal is also supported by the personnel qualification portfolio, which is adapted to all procurement functions and continually updated.

Our requirements as an eco-pioneer are implemented in procurement as part of product group strategic operations. Environmental aspects exert an influence here along with identifying cost savings potentials, and suppliers are managed during the evaluation of Group-related environmental and social services. The “procurement sustainability” work area was created in the general policy division for further development of sustainable procurement.

Procurement as a building block for sustainable development

With our strategy DB2020+ , we clearly affirm our social responsibility. Our purchasing demands responsible procurement management as a significant value driver, both for business and also for the society. However, its contribution to sustainable development can only be successful when applied together with a strong supply chain. With their sustainability performance and power of innovation, suppliers play an active role here in increasing our mutual success in business. The point of departure for forming sustainable delivery relationships and concrete procurement decisions is the Code of Conduct for Business Partners and a comprehensive Supplier Sustainability Assessment of their management system, activities and results. Identified potentials for improvement can then be comprehensibly implemented and monitored to support supplier development. In this way, common risks can be jointly reduced and competitiveness increased. We have requested that our suppliers undergo a CSR evaluation that satisfies the requirements of the sector. Suppliers can present this evaluation in the qualification process. It is developed to include awarding criteria in agreement with the relevant associations.

Collaboration with suppliers

Suppliers are partners in ensuring our success. Their supplies and services are primary components of the added value chain, making them decisive players in the competitiveness of DB Group.

The supplier management of DB Group harness procurement as a strategic factor in competition. Their work involves the essential elements of supplier qualification, development, stabilization and evaluation, and is an ongoing process. High-quality standards are ensured through standardized processes together with experienced suppliers. Supplier management applies throughout the Group and is anchored in our leading IT systems. The medium- and long-term contribution of procurement to the success of DB Group depends particularly on the promotion and utilization of innovations in the supply chains. Several innovation workshops were conducted during the year under review that might provide impetus for future products and business models (such as in the areas of construction monitoring and municipal waste).

The theme of this year’s railway forum was also innovation. In accordance with the slogan “Competitiveness 2025: the innovation agenda for the mobility sector,” future themes for the railway industry were discussed at the supplier conference sponsored by DB Group.

Railsponsible membership

DB Group is a founding member of the Railsponsible sector initiative. This initiative aims to create transparency regarding social, environmental and socioeconomic effects along the entire supply chain and to support suppliers in improving their sustainability practices. Among DB AG other important European companies in the sector are also members of the initiative. With the Swiss Federal Railways (SBB) and the Italian infrastructure company RFI two new members joined the initiative. The chief procurement officer of DB AG was appointed chair of Railsponsible in April 2017.

Expansion in internationalization

DB Group is expanding the internationalization of its supplier structure. This is necessary not least of all due to the increasing tendency toward consolidation in the European railway industry. The focus of activity in international supplier development is in Asia. The purchasing office in Shanghai has identified about 400 potential suppliers since November 2015. More than 25 Asian suppliers participated in DB tenders during the year under review.

The first supply of hollow shafts by a Chinese supplier for a freight car project arrived at the Paderborn and Wittenberge DB plants in March 2017. The high performance of Asian suppliers in the development, construction and approval of rolling stock has also been reviewed in a pilot project since the middle of the year. A contract for the supply of freight car wheel sets was signed in the fall of 2017.

Further reading