How are Volkswagen rearranging procurement operations?

The Volkswagen Group is announcing a new strategy for the procurement of electronic parts and semiconductors

The strategic change is to ensure supply over the long term and secure a leading position in terms of technology as well as competitiveness.

The previous approach was that electronic components like control units were procured and the Tier 1 suppliers were largely free to decide which parts they used. Going forward, in close collaboration and partnership with Tier 1 suppliers, Group procurement will define which semiconductors and other electronic parts are to be used.

The need for procurement transparency 

“A high degree of transparency in the semiconductor value chain – the exact knowledge of the parts used – enables us to better determine the global demand and availability of these components,” said Dirk Große-Loheide, Board Member for Procurement of Volkswagen Passenger Cars and member of Group management.     

“This is underscored by risk management which, in future, will extend to the level of individual electronic parts and help us detect bottlenecks early on and avoid them. For strategically important semiconductors and even the Group’s own planned developments in the future, we will rely on direct purchasing from the semiconductor manufacturers,” 

Volkswagen Polo GTI (Copyright: Volkswagen AG)

The importance of semiconductors 

Semiconductors are vital in the modern automotive industry, as they are essential for mass production, but also drive innovation and are key for launching new products on the market.

The increase in semiconductor demand stems from the accelerating shift towards electric vehicles and the adoption of assistance features. Semiconductors play a pivotal role in the evolution of automotive technology. In 1978, only eight semiconductors were used in a Porsche 911's control unit but now modern vehicles like the Škoda Enyaq incorporate approximately 90 control units housing around 8,000 electronic components, highlighting the profound semiconductor-driven innovations in the automotive sector.

“The transparency regarding semiconductors means that technical alternatives can be identified and implemented more quickly in the event of bottlenecks. Another positive effect is that a reduction in the diversity of variants in the hardware results in a lower degree of software complexity,” said Karsten Schnake, Board Member for Procurement at Škoda Auto and head of the cross-brand and cross-functional task force COMPASS (Cross Operational Management Parts & Supply Security), explaining the advantages.

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