Volkswagen Autoeuropa sharpens its logistics efficiency

At the Volkswagen Autoeuropa plant in Palmela, Portugal, the drive toward peak supply chain efficiency is described by its leaders not as a jaded ‘revolution’, but as a relentless, realistic, and importantly, long-term evolution. As a flagship site for the Group-wide Zero Impact Factory (ZIF) initiative - which targets carbon neutrality across all production sites by 2040 - the facility is currently balancing the phase-out of the T-Roc with the complex preparations for the ID.Every1 electric vehicle. While the plant’s €300 million ($352m) paint shop electrification and geothermal energy network represent massive capital shifts, the logistics department is securing critical gains through a grassroots focus on packaging optimisation and waste elimination.

Leading this effort are Hans-Christian Holbein, Logistics Planning Manager, and Paulo Sousa, Logistics Planning Assembly Coordinator. Their work is defined by the flexibility required to manage a plant located on the geographic edge of Europe, where being 2,000 to 3,000 kilometres from suppliers necessitates unique strategies for volumetric efficiency and internal repacking.

Between 2017 and 2025, their team executed 724 packaging modifications, achieving a 30% reduction in cardboard waste and a 47% reduction in plastic waste per vehicle. These refinements have removed over 523 tonnes of waste from the loop since 2020 and generated €7 million ($9.2m) in accumulated logistics cost savings.

In this exclusive interview, Holbein and Sousa discuss the complexity-efficiency paradox, the transition to multi-model production, and the realities of digitalisation - from "paperless logistics" to the limitations of low-cost automation. Their insights reveal how a facility contributing 1.6% to Portugal’s GDP is navigating global supply chain risks while refining the operational DNA of the "goTOzero" sustainability programme.

Ilkhan Özsevim, Deputy Editor, AL: Hi Gentlemen. Diving straight in, let's begin with you telling me about the logistics setup here as you see it. What kind of changes have you've observed over the past year or two at Palmela. What developments are you seeing?

Hans-Christian Holbein: Regarding the site over the last one or two years, I don't think that we are doing any revolution here at Autoeuropa, but rather it's an evolution over a long period of time. We are in a phase-out of the current product, so there have been no significant changes over the last couple of years. The product life cycle is about eight to nine years. We started in 2017, so we're now in 2025 - eight years in. Throughout the entire time, the logistics process has remained extremely similar. What we typically do over the whole life cycle is optimise in all aspects.

We obviously have crises, but that's nothing new. They pop up suddenly whenever you least expect them. There's always another crisis. This didn't affect us significantly so far, but it can happen at any time. Last summer, in August, we had an insulator supplier burn down in Spain. We had to overcome that situation without losing production. We transferred the tools to Barcelona to another plant of the same supplier and started production there to cover it. These sorts of things happen all the time, so it's nothing specific to the last two years.

We've had Corona in between, we've had the Ukraine war, and everything affects us. There are obviously ups and downs and some special effects, but that's not the regular setup.

We've had Corona in between, we've had the Ukraine war, and everything affects us. There are obviously ups and downs and some special effects, but that's not the regular setup. What we currently have is that we're planning a new vehicle, the planning for which started about a year ago. That is something that has major changes because we are going to adapt the setup in the plant from being a one-model production - where you only have one car to produce every day, across three shifts, six to seven days a week.

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Ilkhan Özsevim: Generally, that never changes?

Hans-Christian Holbein: No, not the biggest changes. It was publicly announced that the production of the ID. EVERY1 model has been assigned to Volkswagen Autoeuropa, with production scheduled to start in 2027. Then we are back to what we already had in the past: a two-model project plan. It's a good thing because you're less dependent on one vehicle or the other. But for us, especially in planning, it's a lot of extra work. Or put another way; a lot of complexity.

Ilkhan Özsevim: Of course. And speaking of complexity, do you generally feel like you match complexity with complexity, or are you always trying to simplify your logistics and production processes and technologies? What do you see as the best approach? Obviously there are all these contending complexities, but then you have to simplify it at least as a schema and implement that, I assume?

Hans-Christian Holbein: We are trying to do that. The problem is, as you've seen today, the more you want to simplify and the less complexity you want to implement, the more inefficiency appears.

Ilkhan Özsevim: Interesting. So its an inverse relationship of sorts? 

Hans-Christian Holbein: It really is. Then you start all over again. In the beginning, we try to simplify things and not make them too complex, but then after a while we realise that a specific process for one particular item could give us significant potential savings. You begin simple and then it gets more and more complex because you want to squeeze out all the potential inefficiencies for all the good reasons - obviously for profit, but also, as we explained, every profit that we make is in some way beneficial for the environment as well.

Ilkhan Özsevim: I see. So tell me this; given VW Autoeuropa's network of suppliers, with a significant number delivering just-in-time, how do you prioritise and integrate diverse suppliers to maintain sequence alignment in production?

Hans-Christian Holbein: Basically, we only have sequence alignment with our local suppliers. We do have some long-distance suppliers that we require to do sequencing, but they only have to do that locally. What I mean is, we're not applying what other German plants refer to as a 'pearl chain.' Porsche does that, or even Audi in some cases. They produce on a pearl chain where all the pearls cannot change anymore once they're on the chain - and it’s a very long chain.

That approach works if you have a lot of stability in the program and you know exactly for the next few weeks what everybody wants to have and you can secure the material. We are very flexible. Even our clients can change the vehicle specification in the last week if they want. If we've already ordered certain parts at that time, then it wouldn't work anymore. We're more in the mass segment where that doesn't apply.Our sequence is basically defined one and a half hours before the car reaches the final assembly. Then we give this information to our supplier.

Every supplier that still starts their production one and a half hours prior, still has to do this. The reaction time of our suppliers is about one and a half to three hours to start production of their own modules - like a cockpit or an axle or whatever component it may be. They produce it in sequence, and also deliver it to us in sequence. So they can't be that far away. Usually, the maximum is 10 to 15 kilometres, but the furthest we have right now, is about 4 kilometres.

Ilkhan Özsevim: That makes sense because at Palmela, what you're saying is you don't really have to track everything if it's hundreds of kilometres away. In other words, it only begins to matter as they approach the facility, within a certain circumference. That’s definitely something for other OEMs to consider.

Now, let's talk about AGVs for line feeding. How is Autoeuropa advancing towards Industry 4.0 in-house logistics, such as through real-time data integration or predictive maintenance? Are you seeing increased digitalisation? Do you see it as increased digitalisation equals increased efficiency, or are there points where it doesn't make sense?

Hans-Christian Holbein: That's an interesting question. I would say we are pretty advanced. But what is digitalisation? We call it paperless logistics. We work in all our plants more or less without any printers, only for export mainly and some special processes. We use the labels from the supplier that are already printed and use them during the whole supply chain without printing anything additional.

We have e-papers along the line side. We have tablet PCs to give all the information to the operators from supermarkets. We use a lot of this data to analyse, and we have extensive data for the automatic warehouse that we've seen.

This brings us additional efficiency. We evaluate how many times AGVs change corridors, what we have to do to avoid corridor changes because that takes a lot of time, where they're breaking down more frequently and for what reasons. We're doing a lot of in-depth data analysis to squeeze out additional efficiency, and that works quite well. However, for AGVs, we would like to have predictive maintenance. There are a lot of companies that offer software for that, but we are still on a very low-cost AGV level, and these low-cost AGVs don't have all the sensors needed to provide the data for predictive maintenance.

You need sensors that give you information about vibration, temperature, and other factors. For the low price we pay for the equipment, we don't get that data.We use it for the automatic warehouse because those big machines are quite expensive and they have all that - temperature sensors for the batteries and so on.

So it's measured and we can do the ideal charging. We get that information. But mostly we are not there yet for predictive maintenance in logistics because it's too low in terms of investment. We use it in the plant extensively for robots and body shop automation because that's multi-million euros and it's really worth the investment. For AGVs, the investment is still not at that level.

Ilkhan Özsevim: I see. And in terms of the EV transition with VW Group's electrification push transforming supply chains, how is Autoeuropa adapting inbound logistics for battery components and rare earth materials, ensuring secure sourcing amid global volatility?

Hans-Christian Holbein: Many people will not like this, but with the EV changes last year, we are sourcing material for the ID.1, and basically for every part that we are looking for, the top suppliers are always the Chinese suppliers. Even for our current model that we have here, the current T-Roc is 99% European, but all the important components like batteries come from China.That means if we were to have a problem with China - like with Corona, for example, or if they shut down the whole country for a couple of weeks - we would also stop for a couple of weeks. We oblige all our suppliers to have a minimum stock in Europe of four weeks - 28 days.

But sometimes we just need that because, for example, the Houthis in the Red Sea don't allow vessels to go through the Suez Canal, and then the vessel has to go all around the Cape, which already eats up the four weeks. So it's a huge dependency and risk for all the models that we produce.We will not have any model here in the plant anymore that is only depending on European suppliers. We've seen this with the semiconductor problems a couple of years ago - small chips everywhere. We are trying to make it as safe as possible with greater stocks, but it's a huge cost, and we try to maintain that cost and risk on the supplier side.

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Ilkhan Özsevim: Paulo, can I get some insights from you, Sir? Tell me about your day-to-day work, what you're seeing, what you find interesting - let’s give our audience some of your ideas as well.

Paulo Sousa: During the last few years, as we already discussed, it was a big challenge to plan and implement this new car because we are building the same cars at the same time for a couple of months. This is a big challenge for us, and planning the ID.1 at the same time - we never have had this kind of situation where we have two models running and are already planning a new model to launch in one year.

The electrical parts, as mentioned, are a big challenge for us because they're coming from China. Some parts are coming in cardboard packaging, and we cannot change this. This is a big challenge for us in the warehouse because the personnel are not used to this kind of process. We have to deal with the cardboard inside the plant, which is also a big challenge for us. We must always be prepared for disruptions. This could be in the form of Corona, or fires - we also had a supplier in Valencia go down with flooding. Fire and water, fire and water. This is normal business!

Ilkhan Özsevim: Ok. So when that happens, let's say you have a supplier that's your main source for a specific component. If you don't have a backup supplier at the time, does that ever happen? And if it does, what do you do to find a backup supplier?

Paulo Sousa: Normally, we try to find an alternative part, another supplier, another plant. Until today, it has been more or less possible. In the case we mentioned, we were able to find a similar part and we could keep production running. As far as I know, we've never had to stop - it depends. The semiconductor situation was more difficult because that was global. But otherwise, we always find a way to keep up with production, though with a lot of effort.

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Hans-Christian Holbein: For the insulator where the plant burned down, we looked at what other cars in the Volkswagen world would use a similar part. We found that the Audi Q3 produced in the Czech Republic had a similar part. It's the same size, more or less. We just had to cut out some sections on the insulator to make it fit into the car, but it required minor changes and a long-time extra transport from the Czech Republic to here.

In the end, somehow somebody always finds a solution. We looked in China because we also produce a T-Roc in China, but the part from China was different from the one we use here, so it wouldn't work. Everyone was glad because all the logistics behind getting it from China would have been a headache. At the end, we found other solutions. Interestingly enough, we always basically find a solution. The only thing is semiconductors were quite disruptive because it was really a significant issue impacting everyone.

Ilkhan Özsevim: I saw in the logistics area that there's a constant exchange of ideas. There's openness to ideas coming from the people who work in logistics and from your suppliers, and so perspectives are constantly flooding in. This is great stuff. But my question is, how do you go about deciding which ideas should be implemented? Do you have a system in place?

Hans-Christian Holbein: To be frank, the first thing we look at is what we get out of it. We have each part put into a large file - actually, it's an Excel file. It's massive. It calculates for every one of the thousands of different parts that we have. It knows exactly what packaging we have right now, where it comes from, what the process is, and everything.

At the end, it calculates for each of them the complete chain - what each of these simple steps costs, what we pay for inbound and outbound transportation, what we pay for the packaging, for the handling, for the supermarket, for customs, for whatever.It does the whole analysis, and you just change whatever you want to change from that proposal. If you want to get a part from a different supplier, you input the new supplier, it calculates everything again, and that's it. The first analysis is based on this massive Excel file. It's extremely complex and took years to build up, but it's the only way to really have quick decisions about what makes sense or not. For the planners to decide whether to take this box, that box, or another box, there are hundreds of decisions behind that.

Paulo Sousa: We have to consider the truck, the handling, the inbound processes - what will be the best process. We have to evaluate a lot of variables.

Ilkhan Özsevim: Why does that make me sad? So what you’re saying is, fundamentally, the deciding factor is essentially a cost analysis. Do no other variables factor into the equation?

Hans-Christian Holbein: No, I promise, a lot more does come into it. And this brings us back to what you said in the beginning about simplifying or not. Do we have enough space? Sometimes we receive a large box with many parts inside, which provides savings in transportation, but we don't have the space at the lineside to put the big box there. So we have to do a repacking process internally. Does it still compensate or not?

A funny thing is - if you look at all the other plants, we probably have more ideas and do much more than the others because we are in a very geographically disadvantaged position on the edge of Europe. That gives us more opportunities than the others because we easily have two or three thousand kilometres between us and our suppliers. For Wolfsburg, that might be 1,000 kilometres and doesn't make sense. For us, with 3,000 kilometres, it makes a lot of sense to get a big box and then do the repacking internally because we have much lower wages and the transportation component is much higher. So it gives us an opportunity that nobody else would pursue because for the others, they pay a third for transportation and double for handling.Sometimes there are complex situations.

I have parts coming from the industrial park, and we don't have the space to receive this bulky material with a complete truck. We have to call it off every two hours because we only have material space for two hours in the plant. The suppliers - we don't have a system like the JIT system for assembly in the body shop. That doesn't usually exist; it's not really required.There are workarounds that we do with some suppliers who have our systems, and they use our systems as well. They put it inside the system and deliver from one warehouse to the other as if it were a warehouse. But we can't do that with every supplier.

We have one supplier that only has one part, and it doesn't make sense to implement that there. Then we have to find how to get the parts here. They have to send it to one of the other suppliers who then sends it to us instead of sending it directly. It's still cheaper. A lot of considerations go into these decisions, and sometimes it's not easy to explain to people why we do such seemingly strange things.

Ilkhan Özsevim: I understand. One last question: if you could give a message to our audience - made up of highly skilled professionals in automotive logistics - what would you say to them?

Paulo Sousa: Flexibility is the word. We must always be prepared for everything.

Hans-Christian Holbein: I would say it's important to get everybody in the same boat - the whole team - and understand that efficiency, progress, digitalisation, and automation are important to maintain the whole plant sustainably. That is something I think we do very well together with our people, our operators, and our works council.

That makes us effective and successful. Despite having the least favourable conditions and infrastructure, we maintain some of the lowest logistics costs among all Volkswagen plants in Europe.