Volkswagen Konzernlogistik (group logistics), the carmaker’s central logistics steering and purchasing organisation, has taken on new dimensions in managing the group’s complex and expanding supply chain
Most automotive supply chains have changed over the past two decades, however few would have been transformed as much as that of the Volkswagen Group. In 1997, although Volkswagen already had plants in Mexico, South Africa, China and Brazil, the group’s supply chain and sales markets were mostly concentrated in Europe. Today, while Germany and Europe remain indisputably its home base, the group has a supply chain and sales network that encompasses the globe. It has built new plants across China, Russia, the US and India, and has recently added assembly plants in Africa along with local partners, including in Algeria this past summer.
In 2016, Asia Pacific became VW’s largest sales region, for example, and the group collectively delivered more vehicles outside Europe than it did within the region.
In total, the number of countries in which the Volkswagen Group produces vehicles has doubled in 20 years to more than 30. Its global production network has trebled to 120 plants, with output rising from around 4.3m vehicles in 1997 to more than 10m passenger, commercial and two-wheel vehicles last year.
During that time, Volkswagen’s stable of brands has grown from five to 12, including the addition of high-end marques Bentley and Lamborghini (as part of the Audi Group) in 1998, Bugatti in 2000 and Porsche in 2012, commercial vehicle-makers MAN in 2011 and Scania in 2014, as well as motorcycle brand Ducati (also part of Audi) in 2012. The model portfolio across the group has risen from 100 two decades ago to more than 300 today.
These increases have added to a supply chain of stunning complexity. Globally, the Volkswagen Group moves around 180m parts and 40,000 finished vehicles per day; along with millions of truck deliveries, each year it dispatches around 100,000 complete trains, ships around 250,000 TEUs of ocean freight and 2.3m vehicles by ro-ro vessel alone.
This network demands highly advanced logistics management. In response, Volkswagen Konzernlogistik (group logistics), the carmaker’s central logistics steering and purchasing organisation, has “taken on entirely new dimensions” at the company, according to Thomas Zernechel, head of the department since Volkswagen established the new group logistics function in 2004 at its headquarters in Wolfsburg, Germany. Its roles include coordinating shared group resources across the supply chain, working together with the purchasing department and introducing new technologies and concepts.
Group logistics has led major supply network changes over the past 13 years, including important brand integration. Common standards for load carriers and packaging have helped to extend the pool in Europe to around 21m containers (including universal load carriers and bespoke equipment) that reduce the use of disposable and non-standard packaging. The division has replaced individual brand consolidation centres and established three group-wide crossdocks in Europe that combine material from suppliers in coordinated milkruns, delivering them in fuller loads across group plants. Shared centres have been created for finished vehicles. Group logistics also recently worked with VW and Audi subsidiaries in North America to create a similar multi-brand network.
Zernechel points to ways in which logistics now plays a more strategic role across the group. Despite the past two decades bringing longer transport distances, more part numbers and increasing production variety, the group has been able to keep logistics costs level as a share of total vehicle cost, or even decrease them, he says. Likewise, he adds that overall order-to-delivery times for vehicles have been reduced, with more flexibility after orders have been confirmed.
Zernechel sees the rising complexity of the group’s supply chain as crucial, with the risks that unforeseen disruption, whether from natural disasters or traffic jams, poses to production stability. That makes capacity management a particularly strategic responsibility for group logistics.
“Flexibility and crisis management have become core competences,” he says. “Every brand now has the same process and interfaces between their systems so that we all understand each other. Often, we are contacted by plants and brands asking for help to manage their capacity issues.”