Dive Brief:
- Volkswagen Group is revamping its procurement strategy for semiconductors and electronic parts, shifting to direct purchasing from manufacturers, the automaker announced last week.
- “In the past, electronic components like control units were procured and the Tier 1 suppliers were largely free to decide which parts they used,” the company said. “Going forward, in close collaboration and partnership with Tier 1 suppliers, Group procurement will define which semiconductors and other electronic parts are to be used.”
- Volkswagen is also creating a semiconductor sourcing committee with representatives from the procurement and development departments of its brands — which include Porsche, Audi and the company’s namesake brand — as well as its components and software units.
Dive Insight:
The chip shortage of the pandemic era roiled the auto industry and threw new light on risks inherent in sourcing and supply chain strategies — elevating the importance of procurement strategy.
At Volkswagen, the semiconductor shortage contributed to a 7% decline in vehicles delivered in 2022, the company said earlier this year.
While the semiconductor shortage has eased with global demand easing and manufacturers adding capacity, Volkswagen is eyeing the future of production and possible disruptions.
In setting up an in-house, cross-department semiconductor sourcing committee, Volkswagen anticipates that “technical alternatives can be identified and implemented more quickly in the event of bottlenecks,” Karsten Schnake, a procurement leader with the company’s Škoda brand and head of an internal supply security task force, said in a statement.
Volkswagen, in its announcement, described semiconductors as “indispensable in the automotive industry,” adding that “not only are they elementary for mass production, but they are also innovation drivers and key for launching new products on the market.”
As more automakers ramp up electric vehicle production, semiconductors will become even more crucial to the industry and in demand, Volkswagen noted.
And its not just semiconductors. Major auto brand have made several moves of late to secure future supplies of materials needed to make EVs. Among many the deals struck recently, Ford has invested in an Indonesian nickel supplier while GM has helped finance a new manganese sulfate plant in a deal that secures 32,500 metric tons of the mineral.
