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Production

As a global automotive and industrial supplier, the Schaeffler Group currently has a global production system consisting of 74 plants in 22 countries. The plants, which employ approx. 65,000 staff, form the core of the Schaeffler production system. They 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.

The global production system follows an integrated model. Along with currently 37 plants producing for the Automotive division and currently 8 plants producing for the Industrial division, the internal supplier “Bearing & Components Technologies” (BCT) brackets all of the Schaeffler Group’s rolling bearing activities. BCT combines the Schaeffler Group's specialized expertise regarding development and production of rolling bearings and provides it to its internal customers. BCT defines the global standards for rolling bearings within the Schaeffler Group’s production system. This streamlines organizational structures, increases transparency and standardization, and generates synergies.

In total, the global production system makes it possible to maintain consistent high levels of quality and efficiency at all Schaeffler plants. The Schaeffler production system is part of the group strategy and, as such, represents the basis for the continuous improvement of quality, cost efficiency, and reliability of supply. Among other things, it facilitates very rapid transfer of innovative methods and processes within the entire network of plants. This standardization accelerates production start-ups and provides flexibility in reacting to regional market fluctuations. As a result, nearly any product can be manufactured at several locations across the globe. The global production system is subject to continuous improvement, with all locations consistently applying the “zero defects principle”. Modern quality management techniques and integrated planning across the entire supply chain ensure that quality requirements are being met. Additionally, continuous value streams between the Schaeffler Group’s customers, plants, and suppliers can be created based on close integration of the network of plants with purchasing and distribution.

The Schaeffler Group increased the production volume of its global production system by 4.6% in 2017. 2017 was characterized by strong growth, mainly in the Greater China region. The company continued to realize improvements in quality and efficiency, resulting in, among other things, a reduction in the number of customer complaints. In addition, the global production system was consistently advanced with respect to efficiency and proximity to the customer. Examples include shifting capacity to lower-cost locations, closing the Elfershausen location, and restructuring production in Brazil. A further priority was the further expansion of the research and development network, which resulted in considerable improvements in proximity to the customer and response times.

In the future, Digitalization will offer significant opportunities for the global production system. The basis for this is interconnecting plant and machines and equipping them with sensors, which increases autonomy in manufacturing processes. For instance, unplanned downtime was minimized by analyzing machine and production data during ongoing production and using the results to predict machine failures. Combined with elements of “Lean Management”, this generates significant efficiency gains and, therefore, improvements in the Schaeffler Group’s competitive position.

Innovative products require an innovative production environment. Therefore, the company aims to create a production environment promoting this while at the same time handling resources in a sustainable manner. The Factory for Tomorrow concept, an initiative under the “Agenda 4 plus One”, demonstrates solutions in response to this. The Schaeffler Group’s “Factory for Tomorrow” breaks new ground when it comes to designing factories. Under this concept, the Schaeffler Group’s objective is to make the plants attractive for employees while increasing the level of integration of all relevant areas in the value chain. Numerous factory planning projects until 2020 offer the opportunity to put this into practice. For instance, the concept is being implemented at the new plant under construction in Xiangtan, China, for the first time. Insight gained from this pilot project will be used in future projects.

Plants in the regions: A total of 47 plants represent the Schaeffler Group in its Europe region. In addition to manufacturing locations in Germany, France, the United Kingdom, Italy, Portugal, and Spain, the group also maintains significant production plants in Central and Eastern Europe. The main plant in Herzogenaurach with its approximately 3,500 production employees ranks among the largest Schaeffler plants and its eight production segments put it among the largest lead production plants worldwide. Along with transmission and steering components, components for the overrunning alternator pulley, and axial bearings, Herzogenaurach also produces complete systems for shifting units, mainly for the automotive sector. A total of just under one billion parts are produced at the Herzogenaurach plant each year. In the future, industrializing electrical-axle transmissions under the group’s strategy “Mobility for tomorrow” will be one of its main priorities.

In addition, the “Additive Manufacturing FabShop” was set up at the Herzogenaurach plant. “Additive manufacturing”, colloquially known as 3D printing, covers a number of digital manufacturing methods, in which objects are manufactured by gradually adding material in layers. The FabShop is responsible for developing additive manufacturing into Schaeffler’s manufacturing technology of the future. Along with additive manufacturing of prototypes, tools, and devices from metals and plastics, the Fab Shop team also addresses issues related to process and materials development, design adapted to additive manufacturing, and the additive process chain. In order to ensure that insights are gained very quickly, the FabShop is used to manage a network of expertise in additive manufacturing that includes not only internal experts but also acclaimed external partners in industry and academia.

Production capacity at the Central and Eastern European production plants is continually being expanded due to increasing demand for Schaeffler products. For instance, a new plant was opened in Svitavy, Czech Republic, in 2017. The new plant further strengthens the Schaeffler Group’s network of plants in Eastern Europe, which is already quite strong. The thermal management modules Schaeffler produces in Svitavy are a product that is required in both internal combustion engines and future mobility concepts, and thus supports the Schaeffler Group’s strategy “Mobility for tomorrow”.

The Schaeffler Group operates a total of 14 plants in the Americas region, including eight plants in the U.S. (South Carolina (5), Ohio, Connecticut, and Missouri) and two each in Canada, Mexico, and Brazil. In Fort Mill in the U.S., the Schaeffler Group operates two plants with a total of approx. 700 employees. In 2017, the plants at the Fort Mill location were expanded to increase capacity for stamping, heat treating, and the assembly of axial bearings.

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 expansion in Taicang and Nanjing has reached its limits, the Schaeffler Group is establishing a new production location in Xiangtan, China, following the “Factory for Tomorrow” concept. It is constructing a plant for automotive parts and precision bearings approx. 200,000 square meters in size. The company intends to expand the new location gradually. Hence, the Tool and Prototyping departments at the new location started operating in 2017. The plant is scheduled to commence full operations in early 2019, which will expand the company’s production capacity in the Greater China region, improving its delivery performance to customers in both the home market and in international markets.

The Schaeffler Group has 5 plants in its Asia/Pacific region. The plant in Changwon, South Korea, is the largest plant in this region. Es is spread over three locations and employs a total of approx. 900 staff. In terms of the value chain, location 1 produces deep groove ball bearings and tapered roller bearings and is vertically integrated from heat treating through to assembly and packaging. A newly installed surface treatment machine will expand vertical integration for Automotive applications. Location 2 is the component supplier – vertical integration ranges from forging soft rings through to turning. Location 3 is a mix of precision bearing manufacturing, tapered roller bearing manufacturing, and special machines as well as an R&D center. This setup facilitates very efficient and customer-specific process design, from development through to tooling and the full vertical range of manufacture.

Logistics

The logistics function is responsible for designing, operating, and continually improving the Schaeffler Group’s entire supply chain. The primary goal of this function is to maximize customer satisfaction at minimum cost by way of timely, accurate, and efficient supply to all Schaeffler customers and plants worldwide.

In 2017, the logistics function was responsible for managing approximately 210 distribution locations with more than 375,000 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 points ensure deliveries to customers. Logistics activities were expanded compared to the prior year.

A significant element of the strategic alignment of Schaeffler Group logistics is the “European Distribution Center” (EDC) project. This project will create a high-performance logistics network for the Industrial division aimed at improving market supply and delivery performance, thus making an important contribution to strengthening the Schaeffler Group's competitive position. The two warehousing locations “EDC North” (Arlandastad, Sweden) and “EDC South” (Carisio, Italy) have met their performance specifications with a goodlogistical performance in their first two years of operation. At the central distribution center “EDC Center” (Kitzingen), the next important milestone toward completing the new distribution network, construction is just about complete. The technical equipment is undergoing initial bulk testing, and the first Kitzingen employees are starting their jobs.

For the Automotive Aftermarket, the company is currently planning the construction of a new assembly and packaging center to be known as Aftermarket Kitting Operation (AKO). The AKO is part of the “Agenda 4 plus One”. The objective of this project is to expand the company’s future competitive position and to mitigate any potential capacity bottle necks at the seven European warehouses currently in operation. The new logistics center, which will be built in Saxony-Anhalt near Halle/Saale with a floor space of about 40,000 square meters, will be the main supply hub for all of the Automotive Aftermarket division’s other regional warehouses in Europe. At the same time, it will serve as the regional warehouse for Central Europe. Construction of a new, highly automated logistics location whose capacity can be adjusted flexibly is designed to further optimize Schaeffler’s Automotive Aftermarket processes, considerably improve delivery performance, increase customer satisfaction, and secure the forecasted revenue growth. The new logistics center will be commissioned in the first quarter of 2020.

Purchasing

The Schaeffler Group’s purchasing function ensures optimal supply of goods and services to the plants taking into account quality, cost, and reliability of supply. 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 remain (1) improving the quality provided by suppliers by cooperating extensively with suppliers, (2) securing competitive procurement costs, and (3) optimizing the supply chain to increase the security of supply by utilizing better logistical connections. In addition, the Working Capital initiative, which is part of the “Agenda 4 plus One”, is aimed at adding value by harmonizing purchasing terms.

Purchasing consists of the corporate purchasing function for production and nonproduction materials, and project-related purchasing for 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 2017, the Schaeffler Group reported an operational increase in the total volume of purchases compared to the prior year. The volume of production material (raw materials and components) included here rose in proportion to the increase in production output. The purchasing volume in general purchasing (nonproduction materials, i.e. primarily intangible assets, property, plant and equipment, tools, supplies, and services) was higher than in the prior year. The Schaeffler Group was able to ensure supply to its plants around the world at all times in 2017. Purchases related primarily to the Europe (63.8%) and Americas (16%) regions. 13.6% and 6.4% 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 nonferrous 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 nonferrous 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.

Continental AG and the Schaeffler Group have been cooperating on purchasing for eight years. Both companies benefit from improvements in cost structures from combining purchasing volumes. By utilizing synergies resulting from numerous cross-regional projects and programs, the Schaeffler Group was able to further improve its cost of materials in 2017.

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