The age-old mantra “profit lies in purchasing” is familiar to all business administration students from their very first semester at university and remains relevant to this day. Ask any chef who spends too much money on ingredients for their restaurant at the wholesale market, or any shareholder who invests too late at an inflated price: this will result in a reduction of their profits. However, merely striving for the lowest price and the most favorable terms is no longer sufficient in today’s market. To ensure the establishment of a successful and enduring partnership, it is essential to consider factors beyond the pursuit of justifiable purchasing conditions.

The procurement division has historically held a more substantial and influential role in a company’s overall success, particularly in multinational corporations like the TRATON GROUP, than is commonly perceived. Today, it goes beyond the mere acquisition of specific goods at optimal conditions. These supplier products must also be delivered to the customer in the right quantity, at the right time, while adhering to ecological and social standards, and meeting the specified technical quality criteria. Moreover, this delivery should be reliable, as the aim is to maintain minimal inventory levels.

The current surge in demand for battery manufacturers

MAN to start series production of the new eTruck at the Munich plant in 2024
MAN will start series production of the new electric truck at its Munich plant in 2024.

This is particularly crucial for critical components such as battery cells. With the global rise of electrification in both private road transport and road haulage, there is a significant increase in demand for these manufacturers. The TRATON GROUP is actively engaged with them, given that the Company, along with its four brands Scania, MAN, Navistar and Volkswagen Truck & Bus, is pursuing ambitious goals for the electrification of its vehicle range. By 2030, the Group aims to have every second truck it sells powered by electricity.

Although this ambitious goal may seem years away, the groundwork must be laid today. To achieve a 50% electrification rate for all trucks sold by the end of this decade, it is imperative to establish substantial supply contracts with battery manufacturers today.

This is precisely what the TRATON GROUP has been undertaking in a large-scale project that started at the beginning of 2021. Notably, each individual brand no longer independently negotiates battery supply contracts. Instead, a collaborative network of procurement experts from the four brands and the Volkswagen Group has revolutionized the procurement process for the next generation of battery cells.

TMS enables efficient and cross-brand development

At the same time, around 8.1 million trucks (weighing 3.5 tons and over) and buses in Europe produce about one-third of CO2 emissions in road traffic today. This is also why the European Commission proposed stricter CO2 limits for these types of vehicles in its revision of the existing CO2 regulation for heavy-duty vehicles in February this year. The proposal also includes an extension of the current regulation for trucks that weigh five tons and above, as well as for coaches and city buses. This would mean that from 2030 onwards, CO2 emissions would be regulated for more than 98% of freight transportation by road in Europe. Until now this figure has stood at 73%. According to the European Commission’s proposal, new trucks must reduce their emissions by 90% by 2040, and all new city buses must be zero-emission as early as 2030. The European Commission, which has set itself a legally binding goal of making Europe climate-neutral by 2050, intends to set a new interim target of a 45% CO2 reduction (previously –30%) for 2030 compared to 2019 and is aiming for a new figure of 65% for 2035. The European Parliament and EU member states must agree in order for the proposal to become law. The draft can still be amended.

Murat Aksel, Chief Purchasing Officer of the TRATON GROUP

“A critical factor for success is the heightened utilization of common parts and the leveraging of synergies in both development and procurement by all TRATON brands.”

Murat Aksel, Chief Purchasing Officer of the TRATON GROUP,

Comprehensive supply contracts with Northvolt and CATL

Scania's battery assembly plant in Södertälje, Sweden.
Scania's battery assembly plant in Södertälje, Sweden

A consortium of buyers representing all brands within the TRATON GROUP has recently concluded a process of complex and technically demanding procurement negotiations over the past two years. The outcome of this effort is the selection of two high-tech suppliers: Chinese manufacturer CATL and its European competitor, Northvolt. Both companies will provide the next generation of truck batteries for all TRATON brands. By deliberately opting for two suppliers, the TRATON GROUP expands its flexibility and secures its capacity to respond to unique market conditions or supply chain challenges as they arise.

The cells procured will be assembled into modules and packs at production facilities in Södertälje, Sweden, and Nuremberg, Germany, and subsequently integrated into the trucks. Production is scheduled to commence in 2027. In total, these planned batteries will have a capacity of approximately 100 gigawatt-hours for Europe and around 45 gigawatt-hours for North America. All in all, these are substantial energy storage capacities - especially when compared to the largest planned battery storage facility in Europe, in the German state of Saxony-Anhalt, which is set to store 600 megawatts of electricity from 2025. This will have the capacity to power 31,250 households for a continuous 24-hour period. TRATON also plans to establish a battery assembly site in the US.

“Same need, identical solution”

The core members of the cross-brand purchasing team have consistently demonstrated a strong performance in recent weeks, months, and years. They adhere to the guiding principle of “same need, identical solution”, in line with the TMS.

As part of this collaborative effort, Christoph Krieg, Vice President Procurement for Electrics/Electronics at MAN Truck & Bus, Daniel Strand, Vice President Electrification at Scania AB and Kevin Fernow, Associate Director Procurement Electronics and eMobility at Navistar Inc., orchestrated the planning and negotiations with Northvolt and CATL. The team was complemented by battery cell buyers Florian Blees (MAN), Leandro Lessa Lopes (Scania) and Dino Muftic (Navistar).

Muftic reflects very positively on their first major joint purchasing project: “The battery cell procurement project was a great example of global cooperation in procurement. The battery cell category is rapidly evolving, and we leveraged the collective knowledge of multiple buyers within the Group to understand the supplier landscape, technology, capabilities, and supplier cost structures. We worked collaboratively on a negotiation strategy that considered the range of priorities of multiple brands operating in different markets to ultimately achieve the best outcome for the Group.”

Dino Muftic, Strategic Procurement Category Manager- ePowertrain Components at Navistar

“The battery cell procurement project was a great example of global cooperation in procurement. The battery cell category is rapidly evolving.”

Dino Muftic, Strategic Procurement Category Manager, ePowertrain Components at Navistar,

The highest common denominator

The joint project’s goal is to attain the highest standards, not merely the lowest common denominator. Muftic, for example, sees clear advantages for ‘his’ brand: “Navistar benefits from the Group’s greater procurement power than by acting alone. Furthermore, Scania and MAN, for example, are more vertically integrated within the battery value chain, from which Navistar can draw valuable insights. Additionally, since we all engage with similar suppliers, there is an exchange of information on how to collaborate with them”.

For Christoph Krieg, the successful project demonstrates three significant aspects simultaneously: “Corporate Procurement is actively looking for synergies for TRATON. Corporate Purchasing lives and breathes cross-brand cooperation. The TRATON GROUP is well-prepared for the next generation of cells and, therefore, for the future of battery-electric vehicles (BEVs)."

Procurement experts Florian Blees (MAN) and Leandro Lessa Lopes (Scania) are also full of praise – and have gained valuable insights by collaborating within the group of buyers. “The TMS also works in procurement. We’re ready for the next project!” says Blees. Leandro Lessa Lopes has also fostered strong connections with his Procurement colleagues from other brands.

During the intensive project phase, the colleagues met virtually on a weekly basis, in addition to numerous meetings with colleagues from the development team who outlined their requirements for the new battery generation to the procurement team. Here, and in all other meetings and activities surrounding the project, it became clear that the strength of the final result lies in the cooperation of the cross-functional team from procurement, engineering and quality management. The team has demonstrated that Group-wide cooperation can be effectively orchestrated in a strategically relevant area. Armed with this knowledge and the understanding that procurement volume for the next generation of battery cells will be consolidated across brands, TRATON is already poised for the forthcoming battery cell generation, and therefore well-poised for a future that will be dominated globally by electric trucks and buses.