In 2017, the main areas of focus in terms of purchasing were ensuring continuity of supply and optimising quality. Due to economic growth worldwide, significant effort was required in many different industries and sectors to ensure that the entire supply chain was able to keep up with the increase in demand for engine components. Major bottlenecks were avoided by proactively managing capacity and ensuring the necessary collaboration between logistics and purchasing. In this context, capacity at suppliers that might potentially create supply bottlenecks was increased so that it will be possible to continue adapting to higher demand and faster changes in future.
Commodity prices rise for the second year in a row
We have been seeing price increases in the primary markets since 2016. Overall, all the average prices for the year were slightly higher in 2017 than the ranges that had been forecast. The effects were only partly offset by savings initiatives and improvements to purchasing terms.
Measures to reduce costs stepped up
In 2017, we intensified our efforts to lower costs, not only to ensure our competitiveness in respect of the next European emissions standard (EU Stage V) but also to offset the negative impact on costs of commodity prices and the procurement of materials. We focused on engine series of less than 4 litres and on the following material groups: exhaust aftertreatment, injection technology and controllers.
We again utilised potential for further savings by increasing the proportion of procurement from emerging markets. By starting work on localising the 2.9 engine series in our joint venture DEUTZ (Dalian) Engine Co., Ltd., China, we will further improve the cost situation so that we can tackle mounting competitive pressure.
Preparations for procuring new innovative products
The procurement department has equipped itself to deal with the new challenges presented by the E-DEUTZ strategy and added innovative products in the areas of e-machinery, power electronics and batteries to its portfolio of material groups. The pace of development, both technical and commercial, accelerated significantly during the year under review.