Volkswagen Group is reorganising its procurement of electronic parts and semiconductors to ensure supply over the long term and avoid the risk of bottlenecks.
The carmaker said it will now work in close collaboration with tier-1 suppliers to define which semiconductors and other electronic parts are used in its supply chain. These will be sourced and even directly procured by the group’s new Semiconductor Sourcing Committee (SSC). Previously, these parts were chosen and procured by the tier-1 suppliers.
Dirk Große-Loheide, board member for Procurement, Volkswagen Passenger Cars said that having a high degree of transparency in the semiconductor supply chain means the OEM can better determine global demand the availability of parts. “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,” he said. “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.”
Following the pandemic and the chip crisis, Volkswagen launched the cross-functional task force known as Cross Operational Management Parts and Supply Security (COMPASS) at the beginning of 2022.
Karsten Schnake, board member for Procurement, Škoda Auto and head of COMPASS said the transparency will help Volkswagen identify and implement technical alternatives in the case of a bottleneck. Schnake said: “Another positive effect is that a reduction in the diversity of variants in the hardware results in a lower degree of software complexity.”
In its half-year financial results, the OEM confirmed that it expects vehicle deliveries to rise to between 9m and 9.5m units in 2023, as previously forecast in March, due to a readier supply of semiconductors and the easing of supply chain and logistics restrictions.
A similar approach to semiconductor shortages has been taken by VW’s competitors in recent months. Barbara Bergmeier, executive director of industrial operations at JLR, told Automotive Logistics that the carmaker has developed direct contracts with around ten semiconductor suppliers. Rather than working indirectly through other suppliers, JLR’s procurement, engineering and logistics teams align with the suppliers to design and plan capacity for its vehicles.
Jeff Morrison, global purchasing chief, General Motors also told Automotive Logistics that under his watch, the company has forged strategic partnerships in chip manufacturing, creating direct capacity and relations with chipmakers for the first time. GM has also sought to expand visibility and connectivity with upstream suppliers through supply chain mapping and advanced analytics. Morrison said the historic lack of direct relationships and supply agreements between OEMs and chip suppliers was one of the many causes of the chip crisis. As a result, GM made more direct supply agreements, leading to a better understanding of product and engineering requirements on both sides.