Procurement that is essential to success
Our procurement ensures the cost-efficient, timely and quality supply of material, capital goods and services worldwide, thereby forming the basis for long-term success and capacity for innovation. All procurement initiatives contribute to the “World-Class Procurement” program which we use to assess and further develop our excellence.
While wages continued to increase across the industry in the year under review and pressure on prices remained high, especially in the services sector, we successfully maintained stable conditions. We achieve the best possible results by cooperating across departments, which is commensurate with the process model embedded in the procurement management system. Commodity group strategies and optimal awarding processes were steadily refined within the procurement teams to achieve the projected savings.
Further improvements are planned as part of the procurement digitalization roadmap, which offers more efficient IT support for processes. Procurement is also a major part of our FINANCE4DB project that we launched in the year under review to digitalize our payment processes with the aim of improving efficiency in the procure-to-pay process. The growing digitalization of our work processes creates more value-adding activities within the teams and paves the way for cutting-edge office concepts to deliver services more efficiently.
Focus on social responsibility and sustainable business among our suppliers
We consider responsible procurement management to be a major value driver for both DB Group and society. We need strong partners as part of a transparent supply chain to make the largest possible contribution toward sustainable development. Our suppliers take an active role in ensuring mutual business success with their sustainability performance and capacity to innovate. The Code of Conduct for Business Partners is the starting point in forming sustainable supply chains and making definitive procurement decisions. We also place great emphasis on comprehensively assessing the sustainability of our suppliers in terms of their management system, activities and results. We have already assessed over 500 suppliers with a purchasing power of over€ 7 billion. About two-thirds of the recently assessed suppliers improved their sustainability performance, enabling us to reduce risks and increase competitiveness together. We also ask our suppliers to be assessed for compliance with Corporate Social Responsibility criteria. For our collaboration with suppliers to be successful, we expect them to take measures to eliminate risks that they have identified, especially in terms of occupational safety and purchasing management systems. As part of an intense dialog with industry associations and Railsponsible (our sustainable supply chain initiative for the rail transport sector), we are making sustainable performance a relevant criterion for awarding contracts. Our suppliers can already present their sustainability evaluation in the qualification process. Railsponsible now has 13 international members and one of its key focuses in the year under review was climate protection. Together with members of the initiative, we have set our stance on the matter in our Position Paper on Climate.
Exemplary supplier management
Our supplier manager comprises four essential elements – supplier qualification, development, stabilization and evaluation – and is an ongoing process. This standardized process helps us to ensure high-quality standards together with experienced suppliers. Supplier management applies throughout the Group and is incorporated into our leading IT systems. Supplier qualification remains central to DB Group’s requirements to be competitive. The pre-qualification system was expanded to include more product groups for this purpose, for example facility management and security services.
Trusted collaboration with industry associations and initiatives also makes it possible for us to orient our supplier portfolio predominantly toward system providers with proven expertise in the rail transport sector. Strategically we are focusing on a high rate of consolidation and long-term framework agreements. We have concluded contracts with a total of 18,000 suppliers, 622 of which fulfill about 80% of purchasing volumes. Purchasing ensures a high level of operational excellence when carried out in line with processes. The Federal Audit Office (Bundesrechnungshof) commissioned an audit of contracting activities, which found that no provisions governing the awarding of contracts had been violated in the Performance and Financing Agreement (Leistungs- und Finanzierungsvereinbarung; LuFV).
There is also emphasis on promoting and using our suppliers’ innovations. For example, in the year under review, we once again held the Supplier Innovation Award prize-giving at InnoTrans – the leading international trade fair for railway and transport technology – after receiving a large number of submissions. We also rewarded outstanding work in the fields of “General requirements and services,” “Infrastructure,” “Rolling stock and parts” and “Environment” with the Supplier Awards.
Even if almost 90% of our prime suppliers are based in Germany, we are procuring more and more from international markets. This is necessary not least of all due to the increasing tendency toward consolidation in the European railway industry. Outside of Europe, we are focusing on developing our supplier base in Asia. With our procurement office in Shanghai, we have identified almost 500 potential suppliers since 2015. In the year under review, Asian suppliers participated in over 20 tender- awarding processes which had a procurement volume of over € 200 million in various product groups. Our activities in the year under review also included qualifying suppliers in Russia and signing contracts in China for the supply of freight cars and very small locomotives. We have reinforced our quality assurance and project management processes accordingly in our Shanghai purchasing office.