Porsche, one of Europe's smallest car makers, is also one of its most successful, and its purchasing strategy has played an important role in that success.

The group has one of the lowest levels of vertical integration of any car maker in Europe, and relies extensively on partners - such as Volkswagen for the Cayenne SUV and Valmet for the Boxster sports car - to help it manage its volumes, including the day-to-day purchasing function.

It has extensively modularised its products - axles for the 911 and Boxster cars, for example, are delivered to Zuffenhausen by ThyssenKrupp.

The door module for the Cayenne is one of the largest and most complete delivered by a supplier to any car maker worldwide, with an estimated 70% of the value-added coming through the first tier operation by Brose.

Porsche has to respond to pricing pressure form competitors and globalisation like any other car maker.

More than three quarters of Porsche's sales are outside Germany. The company largely deals with currency risk by hedging, but purchasing can play a role.

It is also facing rising technical demands and a shorter product innovation cycle.

Porsche emphasising "key suppliers"

Porsche's general manager for forward sourcing, Jürgen Binder, says that the group is looking for earlier involvement of suppliers in new product development in future.

Porsche divides suppliers into three categories - key suppliers, development suppliers and production parts suppliers - and key suppliers should have a larger role in future, he says.

Key suppliers are important for the development of modules and systems for new vehicles, Binder says. This should help Porsche improve quality, he says.

Porsche is also looking for fixed cost reduction and fewer changes in development.

"The role of purchasing is moving from an order processor to a process manager, in particular with the focus of the company on core competencies."

Purchasing should link suppliers in more closely. Generally that means that the level of vertical integration will be reduced, Binder says.

"The role of successfully managing the external supply chain for quality, timeliness and costs is more and more central."

SupplierBusiness.com