Business Review: Deutsche Bahn AG

Deutsche Bahn AG: Driving Innovation in the Mobility Sector

The largest railway operator in Europe is changing transportation with improved supply chain standards, a new high-speed line and autonomous shuttles

Deutsche Bahn AG (DB) is a state-owned German railway company headquartered in Berlin. Founded in 1994 as part of the rail reform, it’s now the largest railway operator and infrastructure owner in Europe and the second-largest transport company in the world.

DB plays a role in all segments of the transport market. It operates 25,000 passenger trains per day at its nearly 5,700 stations throughout Germany, for a total of 4.3 billion passengers per year. It also operates 5,000 freight trains per day transporting nearly one million tons throughout Europe and supports 3 million jobs.

The company believes that as a dependable, comfortable, safe, and environmentally friendly mode of transport, rail has the potential to become an essential part of transport in the 21st century. In 2016 it launched the “Zukunft Bahn” program (Future of the Railway) with the goal of adapting to increasingly tough competition in the passenger transport industry and liberalization of the long-distance market. It also needs to compete with new sharing models and keep up the increasing digitalization of mobility. With this initiative, DB aims to increase quality, punctuality, and reliability to earn more customers and improve economic results.

Supply chain and procurement

Central Procurement serves as the contact and business partner for suppliers to the DB Group. The company is continuously improving its supply chain, and as DB Procurement’s mission statement explains, “DB Group’s business units worldwide are supplied with materials, capital goods and services – economically, on time and with the right quality – and, in so doing, we ensure DB’s innovative capability and sustainable market success.”

DB emphasizes the importance of reliable suppliers and explains that they are an essential factor in the company’s competitiveness. They strive for the ongoing development of their supplier portfolio, with the goal of improving security of supply, cost levels, and process efficiency.

As Chief Procurement Officer, Uwe Günther, explains, “Procurement has, of course, a very important role to play in improving the quality of the services offered by DB. Our focus lies on a greater implementation of purchasing processes and a better alignment with the requirements of our clients.”

Aiming for World Class procurement

The company aims to move from a “Professional” to a “World Class” level of procurement, as determined by a renowned external consultancy. DB’s Professional status places it in the top 25% of all assessed companies, and it aims to become World Class by developing a procurement roadmap through 2020. This timeframe is based on the company’s DB2020+ strategy, which it refers to as “a general framework that harmonizes the economic, social and environmental dimensions in order to guarantee sustainable business success and social acceptance.”

The roadmap includes four central strategic directions:

  • Increasing Procurement’s value added
  • Comprehensive business partner management (including Category Management in collaboration with Technology, Quality and internal clients)
  • Effective supplier management
  • Efficient (digital) processes and organization

Reaching World Class status will require close collaboration with key suppliers and partners, as well as initiating and developing product group strategies with stakeholders and quality assurance units. DB’s plan involves developing suppliers and the market on an international level and ensuring stable supplier performance levels of quality, punctuality, and cost.

DB hopes these ambitious goals will contribute to its success and deliver top-notch product and service quality for its customers.

Supplier management process

DB has also developed a standardized supplier management process, which includes supplier qualification, supplier development, supplier appraisal, and supplier adjustment. The first two phases allow the company to assess each supplier’s technical and commercial suitability prior to the bidding process. In the optional supplier development phase, suppliers who do not meet DB’s criteria can with with the company to improve performance, expand their potential, and minimize risks.

Günther says that their goal with these development measures is “to expand potential and minimize risk by ensuring greater participation in the competition,” and explains that they are, “especially useful in the Rolling Stock and Parts area for international suppliers who are not familiar with the German market and our homologation rules and processes. This is the case for Asian suppliers who are able to provide high quality products but need to learn how to get these certified and approved in Germany.”

The next two phases are designed to ensure high performance and integrate new suppliers. Each supplier is evaluated on their ability to fulfill a contract, as well as quality, costs, and punctuality. DB performs these evaluations throughout their relationship with each supplier and provides them with a rating at least once a year.

Supplier Innovation Award

DB views suppliers as essential partners in achieving safety and quality, and offers an incentive program for suppliers with particularly high performance. It awards both Supplier Awards and a Supplier Innovation Award to show appreciation of excellent suppliers.

In 2018, the company will present its second Supplier Innovation Award to its most innovative partner company. The award will be given to a company that supplies DB with innovative products and services.

Candidates for this distinction help the company deliver excellent performance to its customers and are evaluated on the basis of innovativeness, added value, application potential, and sustainability and environmental protection.

In 2016, the award was presented to Siemens AG, Mobility Division, for the ICE 4 project. The jury based their decision on the innovative powercar drive concept and interior fittings that optimize usable space. They also cited the resource and energy efficiency of the new train’s construction.

Supply chain sustainability

DB Procurement’s goals are in line with the environmental components of the DB2020 strategy, which involve reducing CO2emissions by 30% by 2020. “Sustainable business success and social acceptance are absolutely essential for progress and for a future of operational excellence, customer focus and innovative solutions,” says Günther.

This includes Procurement, because a sustainable supply chain is essential for responsible, sustainable development in the transportation industry.

DB is a founding member of the “Railsponsible” initiative, which involves working with competitors to improve supply chain sustainability and efficiency. Suppliers are assessed based on their compliance to agreed-upon standards for human rights, labor standards, and environmental protection.

Günther explains that, “Through Railsponsible we want to improve environmental and social practices of companies of the railway sector and railway sector supply chain through best practice sharing and capability building.”

Supply chain digitalization

DB supports comprehensive digitalization of the supply chain through the cross-sector “RailSupply” program. This allows for more cooperative and transparent processes in several areas of the industry, from rail operation to supply. Increased digitalization will also maximize supply security, process stability, and supply chain transparency.

“It is not only a matter of digitizing of our existing systems to make them faster,” Günther explains, “It is an amazing opportunity to use new digital solutions to make our procurement processes evolve and our supply chain more secure and more efficient.

The digitalization of DB’s Supplier Management is growing. The procurement process is carried out in a highly effective manner via an e-procurement system using data management systems. DB Procurement implemented an electronic procurement file, which ensures the traceability of all procurement activities and therefore allows the federal government’s supervisory bodies (Federal Audit Office and Federal Railway Authority) a speedy verification.

For some infrastructure projects DB manages BIM-tenders, which include the use of 3D Format as well as cost and time plans (hence 5D).

DB Procurement is also designing a digitalized “Procure to Pay”-process, which will require the connection of all suppliers from submission of offers to order placement, confirmation of order and invoice auditing with at least one EDI-Interface (Electronic Data Interchange). This will be implemented in the first quarter of 2018.

The goal is to handle the procurement process automatically through a platform.The process will be automated thanks to robotics applications and orders will be placed from digitally stored catalogues. The supplier evaluation will be digitalized; the production processes and the supply chain will be monitored digitally.

International procurement

Part of DB’s goal of sourcing from the best suppliers requires internationalization, which presents both challenges and opportunities posed by global markets.

DB established its first international procurement office in Shanghai in late 2015, which communicates with Asian market suppliers and further developed global procurement for the company’s railway departments. Michael Boback, Head of DB’s International Procurement Office Asia in Shanghai, explains that “Global Value Sourcing is one of the main procurement levers for a globally active group like DB… China plays an especially important role here, since over 80 percent of the market growth for high-speed trains over the past few years has been here. The production, development and testing capacities in China are state-of-the-art.”

Though its coverage includes other Asian countries, DB is paying particular attention to China because of its quality in manufacturing, favorable logistics system, and reasonable product prices. The company also cited the positive experiences that other German companies involved in railway manufacturing have had with factories and long-term suppliers in China.

VDE 8 high-speed line

The company also recently opened the Verkehrsprojekt Deutsche Einheit 8 (German Unity Transport Project 8), or VDE 8 project. This high-speed line reduces the travel time for the 623 km between Berlin and Munich from six to four and a half hours. At certain times, it runs the route in less than four. DB estimates that this will double the annual number of passengers between Berlin and Munich to 3.6 million.

VDE 8 also adds 515 km of new and expanded track sections between Nuremberg, Erfut, Halle, Leipzig, and Berlin. DB says it will continue expanding this line and is planning to add a freight train tunnel and other additions by 2028.

This new route is also DB’s largest environmental and nature conservation project to date. The company made preserving the habitats of animals and plants a priority in the planning process and performed extensive environmental analysis before beginning construction.

Autonomous transportation with ioki

The company recently announced their most innovative concept yet, an autonomous, on-demand shuttle under the brand ioki. Users will be able to request a shuttle by smartphone app, then let it drive them to their destination. The shuttle will also enable ride-sharing by picking up additional passengers with similar routes along the way.

This project is designed to make transportation simpler and more flexible, particularly for customers who do not own cars. DB wants to better align with customers’ needs and daily routines, and is hoping these shuttles will help them achieve this goal.

The service is expected to be particularly valuable in rural areas with low population density, where getting to larger public transportation stations can be challenging. ioki shuttles will be an efficient way to transport passengers to larger railway lines, as well as a more eco-friendly, sustainable option than cars.

DB unveiled its first driverless bus in Bavaria in 2017, offering free rides on an eight-minute route in Bad Birnbach. In 2018, these test routes will expand to larger German cities, including Hamburg, with connections to public transport.

There are currently no standardized procedures for autonomous transportation, so DB is partnering with leaders in science and politics to further develop these systems. It is working towards creating an open platform that integrates everything users need for on-demand mobility and is aiming for first regular autonomous transport services by 2025.

InnoTrans 2018

The company will be an exhibitor at the 2018 InnoTrans trade fair. InnoTrans is the world’s leading trade fair for transport technology. With more than 2900 exhibitors in 2016, it has become established as the international industry showplace. A unique feature of InnoTrans is its outdoor and track display area, where everything from tank wagons to high-speed trains are displayed on 3 500 metres of track. It takes place every two years in Berlin and will be held in September at Berlin Exhibition Grounds.

One of the highlights for DB Procurement is the DB Supplier Awards ceremony. At InnoTrans 2018 DB will honour its best suppliers for the 8th time with the DB Supplier Awards and will present the DB Supplier Innovation Award for the 2nd time.

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