e-Business Drivers Wanted

Purchasing cycle times down as much as 95 percent at VW

Wolfsburg, Germany  November 21, 2001 Volkswagen has seen procurement cycle times fall by as much as 95 percent since moving much of its purchasing online, the German automaker reported this week.

The manufacturer says its project to build an Internet procurement platform, begun in the summer of 2000, has already paid for itself through savings in process, logistics and material costs, and the return on investment has come much earlier than expected.

"E-Business is primarily business," said Dr. Jens Neumann, a member of VW's board of management, in addressing the success of the project. "Our strategy of concentrating on process improvements and using Internet technology as a supporting element has been successful."

The company's Internet platform currently includes online catalogue purchasing and online negotiations or reverse auctions, as well as eCap, a capacity management that allows suppliers and VW staff discuss requirements and capacities. These tools have been rolled out for Audi and Volkswagen and have been introduced in the other brands and regions of the Volkswagen Group, which includes Audi, Bentley, Bugatti, Lamborghini, Seat, Skoda, Volkswagen and Volkswagen commercial vehicle brands.

To date, 5,500 suppliers have used the companywide procurement portal, VW Group Supply.com, to obtain information on procurement, logistics and quality standards for all eight brands and the three regions of the Volkswagen Group.

Additional highlights from VW's B2B update:

- Process times have been decreased by up to 95 percent through the simplification of procurement procedures and the optimization of logistical processes.

- About 500,000 transactions have taken place this year on the company's private B2B marketplace.

- Since summer 2000, more than 600 online negotiations have been carried out with more than 4,000 suppliers.

- Currently, 6,000 VW employees all over the world can order any of about 360,000 different items directly from 200 suppliers in the catalogue purchase component of the Internet platform.

The automaker reports that its eCap system  which allows suppliers to see Volkswagen's annual, monthly and weekly planning  has resulted in lower storing and transport costs for both suppliers and VW. "Our suppliers can, primarily through the use of eCap, plan for the longer term, react more quickly and communicate with us more clearly," said Francisco Javier Garcia Sanz, the board of management member with responsibility for group procurement. "That means that both sides can increase their competitiveness."

Nearly the entire procurement volume of the manufacturer's eight brands, totaling about $44 billion, will eventually be managed via VW Group Supply.com.

The project to create the company's supplier portal, called VW Group Supply.com, involved a variety of solutions providers, including IBM, Ariba, i2-Technologies, eBreviate, Hewlett Packard, the Volkswagen subsidiary gedas and consulting company AT Kearney.