Download Nach wie vor, ist die Marktsituation in der Europäischen

Caption Graph 1
Figure 1 - Cooperative materials management reduces the complexity of the supply
network
Replacement Parts Supply: Opportunities for Vehicle Manufacturers and
Customers
In this first of a 2-part series, we introduce the idea of how a vendor managed inventory (VMI)
agreement between a rail vehicle manufacturer and a railroad transportation company can be
rewarding for both parties and explain the advantages of the VMI concept from the manufacturer’s
perspective. Part two, which will be published in the December 2007/January 2008 issue, will
describe the circumstances under which the VMI concept could be beneficial for a vehicle operator.
The market situation in the European rail industry is forcing rail vehicle manufacturers to look very
closely at their replacement parts business. For the railroad transportation companies, this situation
provides the opportunity of working together with the manufacturers to make replacement parts supply
more efficient and reduce costs.
New vehicle business is not an adequate basis for long-term growth
In recent years, the rail vehicle market has been characterized by countervailing developments on the
supply and demand side. Since Bombardier’s takeover of Adtranz in 2000, the European rail vehicle
market has been dominated on the supply side by three major manufacturers in virtually every sector.1
On the demand side, the opening-up of the European rail network to private rail companies has
resulted in a host of startups: in Germany alone there are currently over 400 registered railroad
transportation companies (EVUs). Despite this increase in the number of companies requiring rail
vehicles, the market has remained essentially oligopolitically structured on the demand side: the (in
some cases former) state-owned companies continuing to constitute the most important, highestvolume demander group.
The last few years have also seen growth in the European rail vehicle market as the result of a wave
of modernization that has swept through the major railroads.2 However, because of the usually very
long service life of rail vehicles, in the immediate future we are more likely to see a decline than an
increase in demand among the major players. Whether Europe’s private railroads could compensate
for this decline with an increase in their demand is somewhat doubtful because of the abovementioned
differences in fleet sizes. To maintain or even increase present growth the manufacturers must
therefore open up another source of revenue. One such source could be their replacement parts
business.
Some replacement parts business passes vehicle manufacturers by
As already mentioned, the service life of vehicles in the rail industry is extremely long compared to
other industries. In the case of Deutsche Bahn AG, for example, locomotives that were acquired in the
60s are still in use. 3 Obviously, in the course of the up to 40 year lifetime of a rail vehicle, large
quantities of replacement and exchange parts are required. Pure consumables are removed if
defective or as a preventive measure, disposed of and replaced by new parts. Exchange parts, on the
other hand, are replaced, reconditioned and reused at a later date. Only a small percentage of the
exchange parts pool needs to be replaced each year by new replacement parts due to long-term wear.
1
Bombardier Transportation, Siemens and Alstom dominate the market for high-speed trains, electric
locomotives, electric multiple units and diesel multiple units. The main player in the diesel locomotive
market is Vossloh, with GM occupying 2nd place. However, neither company has a significant share in
the other markets. (Source: “Der Weltmarkt für Bahntechnik”, SCI-Verkehr, 2003)
2
Example: new procurement of 482 electric and diesel locomotives of the Eurosprinter / Eurorunner
family by the ÖBB, new procurement of 585 electric locomotives of the TRAXX family by DB AG)
3 Example: E 110 class (old designation E 10, put into service between 1956 and 1969)
However, this replacement parts requirement does not necessarily translate into sales for the vehicle
manufacturer. Due to the low vertical range of manufacture also prevalent in rail vehicle building, a
significant proportion of the individual parts of a rail vehicle are not sourced from its manufacturer but
from component makers who want to take over supplying the vehicle operators with replacement
parts. The refurbishment of the exchange parts is in turn being undertaken by the operators
themselves in the case of the major railroads and not farmed out to the manufacturer of the vehicle. As
the exchange parts also frequently consist of parts from external suppliers or are even supplied as
complete modules, the vehicle manufacturer often does not even get the chance to supply the
replacement parts for reconditioning. It is therefore clear that considerable effort is required on the part
of the manufacturer if he is to play a significant role in the replacement parts business for his own
vehicles.
Vendor Managed Inventory ties customers to manufacturers
A possible way of reviving the replacement parts business is a cooperation between vehicle
manufacturer and operator along the lines of a Vendor Managed Inventory (VMI) concept. In this case
the vehicle manufacturer manages the replacement parts for “his” product lines, i.e. he assumes sole
responsibility for materials planning, stockholding and provision of the replacement parts. The
customer is guaranteed a defined availability of the required parts at the location specified by him. In
return, the customer is obliged to buy the parts covered by the cooperation agreement exclusively
from the manufacturer.
The advantage of such an agreement to the vehicle manufacturer is obvious: he can take control of
the supply of replacements parts for the vehicles supplied by him, thereby acquiring another source of
revenue in addition to his new build business.
At first sight the vehicle manufacturer has the disadvantage of higher material costs and a certain
dependence on his cooperation partner. Why then should a vehicle operator enter into an agreement
of this kind? The possible advantages of a VMI cooperation from the vehicle operators perspective will
be explored in the second part of this article which will appear in December/January 2008 issue of
Reverse Logistics Magazine.
Karsten Platz is employed as Manager Business Development at TEQPORT Services GmbH, a
Munich based ICT business solution provider. TEQPORT specializes in developing concepts for
marketing pre-owned equipment.
Karsten studied business administration at Mannheim and Swansea University and served various
internships, predominantly within the rail industry. Prior to joining TEQPORT, Karsten worked as a
consultant on various railway-related projects at Barkawi Management Consultants.
You can contact Karsten at [email protected].