Two of Germany’s largest automotive component suppliers have signed a global purchasing agreement that will create a stronger supplier network with improvements to the logistics provision of indirect materials. The companies project cost benefits of €400m ($528m).
As well as exchanging technological expertise, the companies will establish value-added supply chains around the world from a common supplier base in markets across Europe, North and Central America, Asia and Brazil. It will mean halving the amount of suppliers of production materials between both companies from 5,600 to 2,800 suppliers.
As well as common purchasing activities, Continental and Schaeffler will work together on the logistics services required for indirect material sourcing, said Continental spokeswoman Antje Lewe.
“Indirect material services (internal logistics) involves getting purchased products or services from the customer or stock to production, as well as handling logistics between the two companies,” she told Automotive Logistics.
“The cooperation has already started,” she continued. “There have been a number of internal meetings [with the aim of] identifying potential synergies between the two organisations. The cooperation agreement was signed on March 27th of this year, providing a legal framework within which we can now begin joint negotiations with suppliers.”
Continental’s suppliers will now obtain far better access to global steel markets and, in return, Schaeffler will benefit from Continental’s large supplier portfolio.
The move does not constitute a joint purchasing department, according to Schaeffler spokesman Jörg Walz. “The initiative has been defined as "cooperation" and there are no plans for integration,” he said “The negotiations will generally be led by the partner with the larger purchasing.”
The combined purchasing volume of Continental and Schaeffler totalled approximately €20 billion ($26.5 billion) in 2008.
Schaeffler acquired 90.2% of Continental in 2007. The company has been left with a heavy debt burden following the acquisition and subsequent market slowdown. Yesterday it received an agreement for a €1 billion loan from credit lendors, which will give it more time to restructure, and possible received government aid.
