The Deutsche Bahn procurement organisation optimises supply reliability, cost levels and process efficiency.
Deutsche Bahn and we, as its procurement organisation, achieved a great deal in 2016. After the downturn in earnings in 2015, the DB Group is now back on track for success once again: we have not only delivered positive financial results, but also laid the cornerstone for improving the quality of railway operations by launching our “Zukunft Bahn” quality programme. The target for 2017 is to make our performance even more stable.
Procurement is changing rapidly. While procurement teams will always need to drive cost savings, they are constantly endeavouring to become a more complete business partner in order to unlock innovations and drive ever-greater value. They are faced with the continuous challenge of analysing procurement to transform their focus, their people and their whole operation. And time is not on their side.
It is by no means an easy journey to develop the scope and capabilities of your business function while continuing to meet your daily operational commitments.
“Zukunft Bahn” – the future of rail operations in Germany
Joining forces for more quality, more customers, more success – last year we launched our “Zukunft Bahn” quality programme to tackle those matters which our customers found most unsatisfactory. Our customers have already noticed that we have made considerable progress in many areas. Elsewhere, however, we have not achieved results as quickly as we had hoped. We are pleased to say that we were able to improve the average annual punctuality rates year-on-year across all segments: from 94.2 to 94.8 percent for regional passenger traffic and from 72.8 to 76.0 percent for freight traffic. In the long-distance segment, punctuality improved by several percentage points, from 74.4 to 78.9 percent.
So what are our overall goals for this year? We want to improve punctuality even more and increase customer satisfaction. On our way to becoming a profitable quality leader, one of our targets is to raise revenues and earnings before income and taxes (EBIT). We shall continue to raise our appeal as an employer to reach our objective of ranking as a top employer. In our role as eco-pioneer, we shall endeavour to reduce carbon emissions and noise even further.
Achieving the objectives of Zukunft Bahn with the best suppliers
We achieved our targets as a procurement organisation in 2016: we delivered our target contribution to the DB Group earnings with the help of our ProFit programme and ensured supply reliability. Exploiting all commercial and technical procurement levers was and still is one of the keys to our future success. We firmly believe that our long-term strategies for the individual inventory groups and, in particular, our close consultation with our colleagues in the technical and quality assurance organisations and our internal customers who place the orders, are still the basis for successful cooperation and the key to success.
For the DB procurement organisation, the year 2017 will again involve a high level of operational contract awards which will give us the chance to demonstrate our operational excellence on a daily basis. Our unequivocal target is a zero error policy. The systematic application of our reorganised supply management scheme is intended to deliver not only supply reliability, but also improve compliance with delivery deadlines. We plan to roll out a “Digitalised Supply Management” project to achieve these objectives and design a digital supply chain in consultation with our internal customers and selected system providers. As the DB procurement organisation, we are also actively involved in four central competence centres of the DB Group (Operational Excellence/Technology, Digitalisation, Transformation and Sustainability).
Suppliers are our partners when it comes to safeguarding the success of the DB Group. Their goods and services are an elementary part of the value chain and are also crucial for the competitiveness of Deutsche Bahn. Our supplier management makes procurement a strategic competitive factor. By working hand in hand with reliable partners, we guarantee high quality standards by implementing a harmonised control process. Our supplier management policies are valid throughout the DB Group and are an intrinsic element of the major IT systems at DB. Over the medium and long term, we shall optimise the supply reliability, cost levels and process efficiency of the DB Group thanks to the continuous improvement of our supplier portfolio. As our objectives are only viable on the basis of responsible management at our partner companies, we play close attention to compliance with sustainability principles within the management system and to the continuous improvement of the sustainability practices of our partners and their suppliers.
Close cooperation with the best suppliers is the only way we can achieve the designated objectives of Deutsche Bahn.
Heading for World-Class Procurement
Efficient procurement is based on undisputed best practices. The following factors are the key to the success of Deutsche Bahn procurement:
- A procurement strategy that is a firm element of the DB Group strategy, combined with clearly defined purchasing policies
- A procurement organisation that makes use of local expertise to achieve flexible Group-wide coordination and regards purchasing as an interdisciplinary top management task
- Strategic sourcing based on the systematic identification of fundamental starting points and the use of individually targeted levers to reduce costs
- Supplier management which focusses on increasing values together with our key suppliers, but which is also willing to consider new potential suppliers
- Integration of strategic and operational functions via e-tools in our day-to-day business
- Promoting breakthroughs instead of incremental savings as benchmarks and developing supplier volumes on the basis of supplier performance
- Information systems which provide full transparency with regard to procurement volume and facilitate monitoring of compliance with contracts, rules and regulations etc.
- Purchasers with pronounced technical and strategic skills and by providing genuine career flexibility.
We are heading for World-Class Procurement. According to an external benchmarking carried out by consultants from h&z, our procurement organisation was awarded the status of “Professional Procurement”. But we didn’t and we won’t rest on these laurels. We have made great progress over the past couple of years improving from a 10.9 score in 2015 to a 12.4 score in 2016 (especially in the category internal client management). We firmly intend to continue on this positive course to achieve the “World-Class Procurement” status.
DB seizes the opportunities of digitalisation in all dimensions
Digitalisation meanwhile appears in many forms at DB and new aspects are appearing every day. Electronic newsletters and sightseeing tips on the ICE portal keep passengers entertained during long train journeys and also provide customised travel information. As from spring, passengers will also be able to watch TV series and feature films. Also beginning in spring 2017, Flinkster customers will not only be able to book cars through our car sharing scheme, but also electric scooters. Industrial customers already have the option of real-time tracking and tracing of their freight consignments and can even monitor temperature fluctuations or vibrations inside the containers. The first fully automatic rail vehicles are already being tested. Driverless shuttle buses already operate scheduled services on the roads and self-driving, networked trucks (platooning) will follow.
DB is investing around one billion euros in digitalisation projects alone throughout the Group and has additional venture capital amounting to 100 million euros which will be used to provide strategic support for start-up activities between now and 2019.
Digitalisation in procurement – more than just IT...
Digitalisation is therefore also a key topic for procurement. We have drawn up our own digitalisation roadmap for purchasing, based on the following four points:
- Digitalisation of IT and processes in the DB Procurement Network
- Digitalisation of knowledge management and knowledge transfer, profiling/recruiting skills
- Customer perspective: using IT to simplify procurement processes; easier access and order processing
- Customer perspective: in our role as procurement organisation, we support the implementation of digitalised business models at our customers’ companies (e.g. innovation partnerships, start-up management, lean purchasing, purchase of new technologies, such as cloud services etc.).
The following are just some examples of procurement digitalisation schemes that have already been implemented in practice:
- E-contract award
Electronic contract award refers to an IT solution which handles the inquiry management process in all product sectors of corporate purchasing for the DB Group. With the help of this software, contract award can be announced electronically in compliance with legal contract award regulations and offers accepted electronically.
E-contract award provides the DB Group with auditable documentation of all communications with bidders throughout the contract award process. The entire contract award documents are available in a clearly structured form, which leads to an immense reduction in the outlay required for filing hard copy and documentation. The process is monitored and handled in the form of e-contract award in compliance with contract award legislation and with all relevant directives.
The electronic contract award file satisfies all requirements of EU public contract award legislation and also includes digitalised tender documents, offers and contracts.
- Digital building at Deutsche Bahn
Building Information Modelling will entail more changes than just the technical platforms for planning, building and project management.
For us as the largest operator of railway infrastructure in Europe and as one of the largest building project clients on the European continent, Building Information Modelling, generally referred to as BIM, means a gigantic leap forward. The Federal Ministry has helped DB to fund BIM as part of its ‘Investments in the Future’ programme and has provided around 20 million euros. Together with a further nine million euros of Deutsche Bahn’s own funds, we will then have almost 29 million euros to promote the transparency and quality of planning and project management.
In October 2016, Alexander Dobrindt, German Minister of Transport and Digital Infrastructure, and DB AG signed a financing agreement for 13 DB Netz AG pilot projects on rail which are to be planned with the help of digital Building Information Modelling (BIM). The German government is investing around 20 million euros in these pilot projects, and DB will contribute approx. a further nine million euros of its own funds.
The digital planning and building method is based on transparency, trust, openness and cooperation on the part of everyone involved in the project and throughout all phases of the project – from the initial idea and analysis of requirements, to planning and approval procedures, contract award and execution right through to billing and commissioning. Building Information Modelling can also be used to manage operations, servicing and maintenance, and dismantling. Our experience of BIM to date in the course of the Rastatt Tunnel project is consistently positive: the quality of planning and project management could already be significantly improved, so that BIM is to be used for all future large-scale Deutsche Bahn projects.
Procurement rewards the best suppliers
The DB procurement organisation was well represented at InnoTrans in Berlin (international trade fair for transport technology) in September 2016. The fair is an excellent opportunity for networking and for us to meet existing and potential suppliers. Our former CEO Dr Grube took the time to visit some of our partners (such as EVRAZ, CRRC, PESA and Knorr-Bremse) in person on his tour of the fair together with our CPO Mr Günther.
The highlight of the week was, of course, the presentation of the DB Supplier Awards and the Supplier Innovation Award. This was the seventh time that DB had presented Supplier Awards in three different categories (General Requirements and Services, Rolling Stock and Parts, Infrastructure) to companies that stand out from the competition in their market segments, show outstanding achievements in terms of sustainable contract fulfilment, and help us to achieve our objectives and implement our ambitious corporate strategy DB2020+ by delivering premium performance.
The winners of the DB Supplier Awards in 2016:
General Requirements and Services:
Ferdinand Gross GmbH & Co. KG: Since 2012, this company has been DB’s sole supplier and has supplied the company with around 22,000 fasteners of all kinds, such as screws, pins, spacers and washers, with absolute reliability.
Rolling Stock and Parts:
ALSTOM Transport Deutschland GmbH: ALSTOM’s South-West Diesel Network project succeeded in delivering the 38 LINT 41 and LINT 54 diesel multiple units with practically no defects and on schedule for deployment as from the change of timetable in December 2015.
Shenzhen SED Wireless Communication Technology Co., Ltd.: The Chinese company has supplied mobile telephones to DB since 2012 for use in DB’s GSM-R (Global System for Mobile Communications-Rail) internal mobile phone network. DB is highly satisfied with the quality of the telephones and full range of services offered by SED Wireless.
And the first DB Supplier Innovation Award goes to… Siemens Mobility for the ICE4!
In addition to the above, DB also presented the very first Supplier Innovation Award in recognition of particularly innovative products and services which support the Deutsche Bahn AG portfolio and also exhibit a high level of innovation and sustainability. In specifying the criteria for the award, DB sought professional help from the Fraunhofer Institute for System and Innovation Research, ISI Karlsruhe. This ensured that the criteria are based on international standards and that the method for identifying suppliers who demonstrate an above-average innovation level is applied internationally. In contrast to the list of companies nominated for the Supplier Awards, contestants for the Supplier Innovation Award had to apply for the award on the basis of the published entry conditions. The central criteria were the level of innovation and uniqueness of the submitted entry, its application potential and capacity for integration, as well as its sustainability and contribution to earnings.
The winner of the 2016 Supplier Innovation Award is Siemens AG, Division Mobility for the overall product ICE 4. Siemens received the award in recognition of the highly innovative character of the ICE 4, the great flexibility it affords for train configuration and the interior fittings, which make better use of the available space. All of these aspects were developed in close cooperation with the project team at DB.
Thanks to its innovative engineering, modern travel comfort and prizewinning design, the ICE 4 ushers in a new era of high-speed transport. This is the backbone of our future long-distance concept. We shall increase our range of long-distance services by 25 percent by the year 2030, linking up more cities and regions with one another.
The innovative engineering is based on lightweight trailer bogies with inner bearings, SIBAS PN electronic vehicle steering and a modular drive system consisting of independent powercars with identical traction technology. This method, a joint development by Siemens and Bombardier, enables flexible configuration of the ICE 4 to meet different traffic requirements. The 12-part train is driven by six powercars.
Despite its high seating capacity for 830 passengers, the 12-part train is comparatively lightweight. Compared with an ICE 1 with 12 trailer coaches, the ICE 4 has an unladen weight of 670 tons, roughly 120 tons lighter than its predecessor. This reduction in weight has been achieved by using a new type of trailing bogie with inner bearings, which is significantly lighter than the previous bogies. Moreover, the unpowered end cars can be fitted with aerodynamic shrouds. This means that energy consumption per passenger seat is up to 22 percent lower than that of a modernised ICE 1. Like all models in the ICE fleet, the ICE 4 also has an air brake with additional dynamic brake which recovers energy during the braking process and feeds it back into the traction grid.
The DB long-distance transport division is planning to implement its largest ever range of customer services by the year 2030. By then, it intends to expand its range of long-distance services by 25 percent, which means the different regions and metropolises will be linked more frequently, faster, more directly and more comfortably. There will be an additional 150 ICE connections per day and up to two ICE connections per hour between Germany’s major cities. The ICE 4 will play a key role in this development. At the end of 2016, the ICE 4 underwent exhaustive testing under real passenger operating conditions and is scheduled to begin regular operation when the timetable changes in December 2017. It will then gradually replace the previous ICE 1 and ICE 2 fleets.
The next DB Supplier Awards and Supplier Innovation Award will be presented at the next Innotrans in September 2018; entries for the Supplier Innovation Award can be submitted from the end of this year.
DB Procurement at the Railway Forum 2017
In 2016, the InnoTrans was not the only important trade fair for the Deutsche Bahn procurement organisation. In February 2016, the fifth Railway Forum took place with Deutsche Bahn as competence partner. The Railway Forum is a meeting place where more than 500 managers and decision-makers from the railway industry get together to discuss future developments, trends, challenges and key strategies for their sector. It is attended by executives from the Deutsche Bahn procurement and engineering organisations, system manufacturers, suppliers from all parts of the value chain, political decision-makers and leading scientists.
This year, Uwe Günther (CPO, Deutsche Bahn AG) and Kay Euler (CTO & CQO, Deutsche Bahn AG) again served as patrons of the conference. The Railway Forum 2017 will take place in Berlin on 30 and 31 August and will focus on the topic: “Competitiveness 2025: The Innovation Agenda of the Mobility Industry”.
For more information, please visit: https://www.railwayforumberlin.com/
WiFi for everyone, everywhere
In this digital day and age, passengers expect WiFi as part of the travel experience and politicians have also clearly demanded “Free WiFi, also for second-class passengers”. The Deutsche Bahn WiFi project (WLAN@DB), which is part of the corporate “Zukunft Bahn” quality programme, has responded to this challenge and WiFi has meanwhile been available free of charge in the second-class coaches of ICE trains since 1 January.
“WiFi will also be available free of charge in the second-class coaches of ICE trains”: this was one of the promises that DB had made to its customers at the beginning of 2016. DB kept its word and officially announced on 1 January: free WiFi was available on schedule as promised.
Our telecommunications procurement department had to tackle some major challenges related to the procurement of on-board Wi-Fi. But with a great team and excellent teamwork with our end user, DB Long Distance, the procurement process was destined for success. In summer 2016, we completed the contract award process for on-board Wi-Fi hardware, which has meanwhile been installed. In autumn 2016, we awarded the contracts for SIM cards and data to three providers: Telekom, Vodafone and Telefonica.
Installation of the new technology was a huge project: some 250 ICE trains had to be fitted with the new WiFi equipment within just 16 weeks. The ICEs now have state-of-the-art WiFi equipment provided by the Swedish company Icomera. It makes use of the fastest data networks (LTE, UMTS) of all the mobile radio networks along the railway line and can bundle the capacities of several network operators. In the past, it used only the Deutsche Telekom network. Each passenger in a second class coach now has access to a data volume of 200 MB per day, which means they can now send and receive e-mails, chat and surf the net without any problems. Passengers in first-class coaches have access to an unlimited data volume.
German Unification Traffic Project lineside signals: the latest high-tech control system
The target for 2017: Berlin–Munich in four hours
High-speed trains will soon be able to use the entire new line at speeds of up to 300 km/h. They will take customers between Berlin and Munich from city centre to city centre in record time, making train a genuine alternative to car and plane. German Unification Traffic Project No. 8 (VDE 8), the link between Nuremberg and Berlin, is nearing completion. The new-build Erfurt–Leipzig/Halle line went into operation at the end of 2015 and all the new line sections between Nuremberg and Berlin will be ready for use in 2017.
This 10-billion-euro project was resolved by the German government back in 1991 in order to improve traffic connections between eastern and western as well as northern and southern Germany. At the same time, it closes the gaps in the German high-speed rail network. The new lines will also be used by freight trains. This new route offers enormous potential for implementing best-practice traffic concepts and marks the start of a new era of railway travel.
The inauguration of the new-build Erfurt–Leipzig/Halle line in December 2015 (VDE 8.2) significantly increased the pace of east-westbound traffic: passengers travelling between Dresden and Frankfurt now reach their destination one hour earlier. The upgraded and new-build Nuremberg–Erfurt line (VDE 8.1) through the Thuringian Forest will reduce the journey time between the major cities in the south and north of Germany by up to two hours. The journey time between Leipzig/Halle and Berlin was already reduced by half, to roughly one hour 15 minutes, when the upgraded line (VDE 8.3) went into operation in 2006.
Radio-controlled traffic: Erfurt-Halle/Leipzig is the first line in Germany to receive a new lineside control system
The European rail network is becoming more and more modern and the technical systems of the individual countries are gradually being harmonised. Work is currently underway on the installation of the European Train Control System ETCS, one of the major elements for promoting the integration of railway operations between the individual European countries. ETCS is ultimately intended to replace the more than 20 national train control systems that are currently in operation in Europe. The core element is the permanent radio communication between the train and line control centre. This new technology will make rail connections faster and safer as there will no longer be any need for the time-consuming changeover between the different systems when the train crosses a national border.
The first German route to be equipped with the new system went into operation between Leipzig/Halle and Erfurt in December. This line, which is part of German Unification Traffic Project No. 8 (VDE 8), is now one of the most modern railway lines in Europe and, thanks to the automatic control system, can be used at speeds of up to 300 km/h. This would hardly be possible with conventional technology, as a train driver can no longer monitor and respond to signals manually when travelling at speeds of between 250 and 300 km/h.
The first anniversary of the International Procurement Office Asia: a look back
One year after it opened in November 2015, our International Procurement Office (IPO) Asia can be proud of its first achievements. Our IPO Asia colleagues travelled nearly 250,000 kilometres over the course of the first year. The team visited suppliers at over 30 locations in China, Japan, South Korea and Taiwan, and established contacts with the procurement departments at the Chinese and Japanese rail companies. They saw many excellent suppliers that can manufacture in accordance with European quality standards and are equipped with state-of-the-art production and testing facilities.
At the end of 2016 we concluded a master agreement with the Chinese company Railteco. The agreement provides for Railteco to manufacture a total of 17,000 hollow shafts by 2019. The shafts will be used to secure cargo on the freight cars.
This is the first framework agreement which has been signed with the support of the IPO. Railteco is a spare parts provider which has evolved from a small-scale manufacturer to a global player.
CPO Uwe Günther travelled to Shanghai to officially sign the agreement on November 16. The first purchase order has already been submitted.
The first 2,100 shafts were successfully tested and are now on their way to Germany.
The first delivery is expected in March 2017.
Last year, our International Procurement Office Asia:
- identified almost 300 suppliers
- began the qualification process with 50 suppliers (including eight who participated in DB tenders)
- signed the first IPO framework agreement in November 2016 (for hollow shafts)
- generated nearly EUR 1 million in potential
The team is currently assisting with 10 procurement procedures.
Uwe Günther (CPO Deutsche Bahn) reported on his trip to China and Japan in November 2016: “This trip was highly educational and strengthened my belief that the decision to open a procurement office in Asia was correct. Asia has enormous potential and it is up to us to exploit that potential in the interests of our internal customers so that together we can identify the best product for our passengers.”
Sustainable procurement at DB
Railsponsible’s activities in the past and the coming year
Since 2015, Deutsche Bahn has been a member of the rail industry initiative Railsponsible which promotes a sustainable and efficient supply chain in the rail industry. In 2016 Railsponsible was happy to welcome its seventh member, the Swedish company Svenska Kullagerfabriken (SKF).
By the end of 2016, about 1,200 railway industry suppliers had been invited to take the EcoVadis assessment: around 480 of these companies participated and agreed to share their results with all Railsponsible members. Railsponsible doubled the number of supplier assessments over the course of last year, compared with the figure of 240 supplier assessments at the end of 2015. This was a key achievement for our new initiative that was made possible thanks to efficiency for both suppliers (who only need to fill in the questionnaire once and results are made available to all Railsponsible members) and also Railsponsible members (all members use a common standard and are in close contact with suppliers).
Railsponsible also finalised its 2020 Strategy which defines its roadmap for the coming years. For 2017, Railsponsible’s main focus will be the implementation of all the work streams of its 2020 Strategy, namely:
- #1 Empower staff members and executives: share training tools and resources on sustainability and sustainable procurement, plan common training kits for buyers
- #2 Build common programmes: work on common activities around GHG emissions, health & safety, and eco-friendly products, develop recommendations for updating member companies’ Codes of Conduct
- #3 Railsponsible stakeholder engagement: target prioritised events to promote a responsible railway supply chain, apply for membership to the United Nations Environment Programme’s 10YFP Sustainable Procurement programme
Connected to the latter, in 2017 Railsponsible will also contribute to impactful discussions at a number of high profile events on sustainability and rail industry gatherings. So far Railsponsible plans to be represented by its members at conferences such as Produrable (March 2017, Paris), EcoVadis Sustain (April 2017, Paris), 6th Railway Forum (August 2017, Berlin), Sustainable Supply Chain Submit (October 2017, London), as well as Annual Global Strategic Sourcing and Procurement Summit (September 2017, London). The member companies attending these events will be more than happy to answer any questions visitors may have on Railsponsible.
For more information, please visit: http://railsponsible.org/
The Deutsche Bahn pilot project StationGreen promotes the construction of particularly climate-friendly railway stations in Germany.
Ecological sustainability is a key criterion for making decisions about the construction and modernisation of railway stations. If the construction process has already begun, we concentrate on ecological optimisation to make the future operation of our stations climate-efficient.
On launching its StationGreen pilot project, Deutsche Bahn is implementing a construction programme for particularly climate-friendly stations in Germany. This pioneering project puts state-of-the-art ecological standards into practice.
In future, these stations will feature green roofs, building materials made of sustainable raw materials and high proportions of glass. They will also use geothermal, photovoltaic and rainwater percolation technologies which, amongst other benefits, will permit carbon-neutral operation of the passenger buildings in future.
The first two stations are already up and running: since 2014, trains at Kerpen-Horrem in North Rhine-Westphalia depart from a green station. The second green station, in Lutherstadt Wittenberg in Saxony-Anhalt, was inaugurated in December 2016. The projects are funded by the regional governments, from Deutsche Bahn’s own funds and Kerpen-Horrem station also received financial support from the European Union’s INTERREG-IVB programme.
In addition to these ecological aspects, the new station buildings offer passengers additional convenience such as digital reception facilities, which allow the customer to access comprehensive information and to communicate directly with service staff via a monitor.
The broad-based sustainability concept of “StationGreen” in Kerpen-Horrem and Lutherstadt Wittenberg points the way forward for the overall ecological design of our railway stations.
By delivering on StationGreen and such a wide range of other procurement projects in the coming months, Deutsche Bahn will continue to deliver excellence for its passengers and corporate clients.