Last week Continental and Schaeffler added a further nine suppliers to their burgeoning 'Premium Supplier Circle' programme. The nine suppliers are BASF, Etampa AG, Anton Häring, KAMAX Automotive, PennEngineering, Porite Taiwan, G.A. Röders, Scheuermann + Heilig, and Schunk Sintermetalltechnik. Continental and Schaeffler have been cooperating in purchasing for six years now and have more than 1,200 strategic suppliers. The companies evaluated 110 suppliers on criteria which include a suitable product portfolio, quality aspect, logistics services and their global presence. Moreover, Continental and Schaeffler confirmed the status of 28 existing premium suppliers and are aiming to eventually enrol 200 suppliers in the scheme.
Schaeffler's and Continental’s selection criteria include a suitable product portfolio, high quality requirements, as well as good logistics services with a global and regional presence. In addition to this, the demands on the joint suppliers are also increasing. Schaeffler said that as products become more complex and their development times shorter, the need to fulfil OEM requirements in a timely manner requires more attention. By collaborating with premium suppliers, Continental and Schaeffler aim to develop products that meet customers' cost and quality parameters.
Continental and Schaeffler have been steadily increasing joint purchasing over the past six years aiming to reduce cost and improve efficiency. The joint purchasing by the two major German suppliers is expected to reach EUR16.2bn (USD17.3bn) this year. The combined efforts could represent as much as half of total purchasing spend for the two companies.
With a purchasing budget of this size and with around 1,300 suppliers in total, management of the companies’ supply base is crucial. Tier one suppliers are increasingly adopting the schemes used by automakers that have to manage large budgets and supply bases. The system of preferred supplies is another means of securing larger tier suppliers for the long-term.
The premium suppliers will not only collaborate with Continental and Schaeffler on various projects but will also get increasing share of their supply contracts. This arrangement is also expected to help Continental and Schaeffler create a reliable common supplier base. The thinking within the industry is that by locking suppliers into longer-term contracts and getting them involved in the vehicle design process earlier, they can expect suppliers to share more technology and better processes that help save money.
The growth of the scheme is also part of a stable period in what started off as a very troubled acquisition when in 2008, Schaeffler took a 90% stake in Continental. The offer for Continental, made just before financial markets collapsed, was accepted by more investors than expected, burdening Schaeffler with €22bn of debt. Since then the Germany-based family-owned group has taken several routes, including refinancing and selling of shares in Continental, to reduce its debt. The restructuring efforts have been successful, so much so that in October, Schaeffler offered an initial public offering (IPO) of 75 million shares. The offering is expected to create funds of around EUR975 million (USD1.01 billion). The reduction in funds will affect the company’s plan to reduce its debt.
