Operations, Supply Chain Management & Purchasing
As a global automotive and industrial supplier, the Schaeffler Group currently has a global production system consisting of 73 plants in 22 countries. The plants, which employ approximately 67,000 staff, represent the Schaeffler Group’s “backbone” and are managed based on uniform principles. The global network of plants, the manufacturing technologies they utilize, and the high degree of vertical integration represent key factors underlying the Schaeffler Group’s worldwide success.
In order to further strengthen the production system, all plants were assigned to the Automotive OEM and Industrial divisions during the year. This realignment brings the plants closer to the markets and establishes consistent responsibilities for the business and earnings worldwide. In order to comprehensively implement the realignment, the “Bearing & Components Technologies” (BCT) unit, which had previously acted as an internal supplier, was integrated into the divisions and each of its plants assigned to one of the divisions. As a result, 20 plants are producing for the Industrial division and 53 plants for the Automotive OEM division. The Automotive Aftermarket division will continue to be supplied from the Automotive OEM division’s manufacturing locations as before.
Along with these reassignments, key functions within plants located at one production location will be combined at campus level. This results in a high level of transparency and standardization and generates synergies. In total, the global production system makes it possible to maintain consistent high levels of quality and efficiency across all of the Schaeffler Group’s plants. Schaeffler process management is part of the group strategy and, as such, represents the basis for the continuous improvement of quality, cost efficiency, and delivery performance. Among other things, it facilitates very rapid transfer of innovative methods and processes within the entire network of plants. Standardization accelerates production start-ups, enabling the company to rapidly and flexibly respond to regional market fluctuations.
Schaeffler’s technology network drives new production technologies, enhancements and improvements designed to expand the company’s technological leadership, as well as the development of uniform standards. The technology network is tasked with developing volume production technologies. The technology network enables the company to uniformly advance its production and manufacturing technologies, realize synergies, and benefit from standardization across all divisions.
In addition, digitalization provides significant opportunities for the global production system, and the company has developed a comprehensive approach to digitizing Schaeffler’s production. Its objective is to improve performance and efficiency of the sensor-based, interconnected, data-based enhancement of processes, supported by artificial intelligence as applicable, beyond what previous approaches have achieved. Another objective is to reduce and simplify manual interfaces by providing individual information to staff, tailored to their specific task. Following the development of the required fundamentals and their implementation in the form of suitable pilot projects, the company intends to, along with improving individual technologies, comprehensively enhance the value stream - in planning as well as in operation.
A tangible example of this is the improved utilization of capital tied up in machinery. For this purpose, Schaeffler has developed a system that helps prepare for investment decisions by providing an overview of the spare capacity of all significant machines of the Schaeffler Group. The data base consists of machine-specific planning data as well as data from the Manufacturing Execution System, categorized into technology classes. All relevant machines of the Schaeffler Group have been assigned to one of these technology classes, which are based on the various manufacturing methodologies of a specific processing step. This increases transparency regarding utilization, which forms the starting point for determining appropriate measures for improvement, thus supporting capital expenditure planning and increasing overall equipment effectiveness.
Another example of digitalization in manufacturing is additive manufacturing (AM). The manufacturing technique colloquially called 3D printing refers to numerous technologies that involve directly manufacturing components starting from a digital 3D product model, without the need for drawings, manufacturing programs, or tools. As a result, AM provides the basis required to successfully implement a fully digital process chain from the product model through to the finished component. The Schaeffler Group had already created the basis for successfully implementing AM in the manufacturing system in previous years. In the future, the company will focus on applying AM in volume production, starting with small-series production due to the technological limitations AM techniques are still subject to.
However, this initial application will already involve the integration of AM into existing process chains and the development of new hybrid process chains. An internal AM competence center is already working on this in an interdisciplinary manner with numerous departments as well as externally with a network of selected partners. These measures are designed to make the Schaeffler Group a reliable and flexible supplier of additively manufactured products.
Plants in the regions: A total of 46 plants represent the Schaeffler Group in its Europe region. In addition to manufacturing locations in Germany, Western and Southern Europe, the group also maintains significant production plants in Central and Eastern Europe. The main plants of the Automotive OEM division in Buehl and the Industrial division in Schweinfurt as well as the plant at the corporate head office in Herzogenaurach with their approximately 9.100 production employees form the basis of the Schaeffler production network. Together with the R&D centers and corporate functions, they guarantee the development and industrialization of new systems under the “Mobility for tomorrow” strategy and the advancement of the Schaeffler production system.
In Buehl and Herzogenaurach, several projects for electric and hybrid vehicles for international automobile manufacturers have entered volume production and a large number of other systems are under development. For example, gears will play an important role in electric mobility and represent one of the remaining mechanical core components of the drive train. Special noise emission requirements apply to transmissions. In order to be able to directly influence the running smoothness by better coordinating the interaction of gears, Schaeffler is building a pilot plant for gear production in Herzogenaurach. Volume production of the first mechatronic systems for Industrial customers is up and running in Schweinfurt. Meanwhile, additional space for production, development, prototyping, and construction of special machinery has already been generated at these locations or is still partly in the planning stage.
Production capacity is continually being expanded in the Europe region due to increasing demand for Schaeffler products. For instance, the plants in Debrecen, Hungary, Kysucké Nové Mesto, Slovakia, and Pune, India, were expanded in 2018, further strengthening the Schaeffler Group’s network of plants in Eastern Europe, which is already quite strong, and building capacity for the Indian growth market. The Debrecen plant manufactures tapered roller and ball bearings for transmission applications. Products manufactured in Kysucké Nové Mesto include wheel bearings and electronic steering and brake systems. In Pune, an expansion of manufacturing capacity for engine components and transmission applications is under way.
The Schaeffler Group operates a total of 14 plants in the Americas region, including 8 plants in the U.S. and 2 each in Canada, Mexico, and Brazil. In Wooster in the U.S., production has been expanded and initial electric mobility projects have started up in 2018. In Mexico, the Schaeffler Group operates 2 plants with a total of approximately 2,600 employees. In 2018, these plants were expanded once more, further increasing capacity for clutches, double-clutch transmission systems, and wheel bearings. The company has also established an assembly facility for thermal management modules for the region. The location in Joplin is being expanded further as well and manufacturing capacity for bearings for industrial applications increased again.
In its Greater China region, the group operates 8 plants. The persistently high level of demand for Schaeffler products in China requires a continual expansion of local production capacity. As a result, the location in Nanjing, China, was expanded in 2018 in order to meet increasing demand for rolling bearings for industrial applications as well as for engine components for the Engine Systems business division. Additionally, the groundbreaking ceremony was held at the new production location in Xiangtan, China, that follows the “Factory for Tomorrow” concept. Schaeffler is constructing a plant for automotive parts and precision bearings approximately 200,000 square meters in size. The “Factory for Tomorrow” concept, an initiative under the company’s program for the future, the “Agenda 4 plus One”, is aimed, in particular, at increasing flexibility, modularity, and productivity while also raising employer attractiveness and workplace quality. Recruiting and training for the new location commenced in 2018, and initial machines will be installed as early as in 2019.
The Schaeffler Group has 5 plants in its Asia/Pacific region. By building a new plant in Biên Hòa City, Vietnam, that was completed in late 2018, the Schaeffler Group has considerably expanded its production capacity for rolling bearings in this region. In this context, the existing manufacturing facility in Vietnam will move to the new production building that meets future requirements. Biên Hòa City mainly manufactures plummer blocks and needle roller bearings with an international design with a high degree of vertical integration.
Supply Chain Management
The supply chain management function is responsible for designing, operating, and continually improving the Schaeffler Group’s entire supply chain. The primary goal of supply chain management is to increase customer satisfaction by way of timely, accurate, and efficient supply to all customers and plants worldwide.
In 2018, Schaeffler started its “Global Supply Chain” initiative – part of the “Agenda 4 plus One” – to more closely align its logistics processes along its three divisions, Automotive OEM, Automotive Aftermarket, and Industrial. The initiative focuses the process-related and structural alignment of the three division’s supply chains on customer satisfaction and efficiency as well as on the comprehensive nature of efficient logistics value chains. Along with a supply chain design that optimizes supply chain inventory levels, thus helping to reduce working capital, the initiative involves creating a platform for integrating suppliers and for efficiently supplying customers. The objective of the initiative is an increase in delivery performance and agility. The initiative is cross-functional and cross-divisional in nature.
In 2018, the supply chain management function was responsible for managing approximately 210 warehousing locations with more than 400,000 square meters in storage space and for moving approximately 300,000 tonnes in freight between the most significant destinations within the Schaeffler Group. More than 120 shipping warehouses ensure deliveries to customers. Logistics activities were expanded compared to the prior year.
A significant element of the strategic alignment of the Schaeffler Group’s supply chain management is the “European Distribution Center” (EDC) project. This project is designed to establish a high-performance logistics network for the Industrial division. In 2018, commissioning of the “EDC Central” in Kitzingen was celebrated in an opening ceremony and initial orders were delivered to customers. The company plans to connect all plants to the EDC and to supply all Industrial customers in Europe exclusively from the EDC by 2020.
For the Automotive Aftermarket, an assembly and packaging center known as Aftermarket Kitting Operation (AKO) is currently under construction in Saxony-Anhalt near Halle (Saale). The AKO, an initiative under the “Agenda 4 plus One”, will be the main supply hub for all of the Automotive Aftermarket division’s other regional warehouses. In addition, customers in Central Europe will be supplied directly from the AKO. Its construction started with a cornerstone laying ceremony during the year. The AKO will commence operations in the first half of 2020.
In this manner, the investments in the EDC Central and in the AKO will directly help improve the Schaeffler Group’s delivery performance and secure its competitiveness.
The Schaeffler Group’s purchasing function ensures the supply of goods and services to the plants taking into account quality, cost, and delivery performance. By means including involving suppliers in the process of establishing production, it guarantees external supply even before production starts. By consolidating purchasing volumes, the purchasing function contributes to the continual improvement of the Schaeffler Group’s supplier network. The key objectives of purchasing are to improve the quality provided by suppliers by cooperating extensively with suppliers, secure competitive procurement costs, and to optimize the supply chain in order to increase the security of supply by utilizing better logistical connections.
The purchasing function consists of the departments for production and non-production materials, with procurement of production material managed both at the corporate and at the divisional level. To strengthen the divisional purchasing functions, the purchasing volume under divisional responsibility was increased significantly in 2018 in order to deepen the connection between the purchasing function and the divisions and to more firmly embed the responsibility for earnings in the divisions. In addition, purchasing is divided into the Europe, Americas, Greater China, and Asia/Pacific regions, which incorporate the purchasing function for the respective plants.
In 2018, the Schaeffler Group reported an operational increase in the total volume of purchases compared to the prior year. The purchasing volume of production material (raw materials and components) included here rose, as did the purchasing volume of non-production materials (primarily intangible assets, property, plant and equipment, tools, supplies, and services). The Schaeffler Group was able to ensure supply to its plants around the world at all times in 2018. Purchases related primarily to the Europe (65%) and Americas (15%) regions. 13% and 7% of purchasing volumes related to the Greater China and Asia/Pacific regions, respectively.
The Schaeffler Group uses various raw materials such as steel (flat steel or steel bar), iron and aluminum casting, as well as non-ferrous metals in manufacturing its products. The production materials Schaeffler uses primarily depend, directly or indirectly, on the trend in the price of scrap steel, coking coal, and iron ore, as well as non-ferrous metals. Price changes are normally either passed on indirectly with a time-lag via changes in costs charged by suppliers or via new prices during contract negotiations.
Under the strategy “Mobility for tomorrow”, the purchasing function is developing purchasing capabilities for new materials, especially for E-Mobility and Industry 4.0. Additionally, the purchasing function is helping to harmonize and standardize processes while reducing costs by implementing a multi-function shared service center organization. Furthermore, the “Working Capital” initiative, which is part of the “Agenda 4 plus One”, has harmonized purchasing terms.