Supplier management

Overview of Procurement organization

For the Zeppelin Group, sustainable supplier management means assuming responsibility for complying with social and ecological due diligence throughout the supply chain. A central topic in procurement is the definition of Group-wide benchmarks for the selection, assessment, and monitoring of suppliers and supply chains. This ensures that suppliers meet quality, cost, reliability, sustainability, and human rights requirements.

The individual Group companies have their own procurement organizations that buy materials and services for the respective company and its sites, or set the framework conditions for decentralized procurement. The procurement organizations of the individual Zeppelin companies are networked in an international Group procurement team. This team identifies and coordinates common procurement topics with the aim of developing uniform procurement standards for all Group companies and ensuring common procurement sources and optimized conditions. In addition to the central consideration of defined product groups, the topic of supplier management in particular, with the aspects of supplier selection, supplier evaluation, risk management, sustainability, and due diligence obligations in the supply chain, will be uniformly designed for the Zeppelin Group. The lead buyer concept¹ that has been established since 2010 is being maintained. In this system, the lead buyer is responsible for the central processing of one or more procurement topics. They are supported by a co-buyer from another Zeppelin company. The Group Procurement Guideline defines the framework and regulates responsibilities.

As a foundation-owned company, environmentally and socially responsible corporate governance is a matter of course. Our self-declared aim is to continuously optimize our business activities, products and services in terms of sustainability. We also expect this holistic approach from our suppliers and service providers. For this reason, Zeppelin has initiated a Supplier Code of Conduct. These guidelines, principles, and requirements are considered the basis for profitable cooperation. The Code forms the basis for all future deliveries and projects. The contracting parties agree to comply with the principles and requirements of the Code of Conduct, and to commit to contractually obliging their subcontractors to comply with the standards and regulations set out in the Code of Conduct.

Supply chain description

At EUR 2,584 million in 2022, the Zeppelin Group’s purchasing volume² increased slightly compared with the previous year (2021: EUR 2,527 million). Around half of the procurement volume is attributable to the procurement of merchandise for our business partner Caterpillar Inc., with whom a close business relationship has existed since the 1950s. Trading in and servicing Caterpillar products makes up a significant proportion of the Zeppelin Group’s business activities. Zeppelin Baumaschinen GmbH focuses on the distribution and service of Caterpillar construction machines and components, Zeppelin Rental GmbH leases Caterpillar construction equipment and attachments, among other things. Zeppelin Power Systems GmbH develops, sells, and services, among other things, drive, propulsion, traction, and energy systems based on Caterpillar engines.

The procurement volume outside of the trade with Caterpillar Inc. is primarily attributable to suppliers in the technical product field. Zeppelin Rental GmbH procures construction machines, conveyor technology, construction equipment, and heating and air conditioning technology for machine and equipment rental. In addition, Zeppelin Rental GmbH’s procurement covers materials and services for construction site equipment, construction site and traffic guidance, modular room and sanitary systems, and construction logistics. Another area of focus is on materials and components for the production of mixing and silo systems at Zeppelin Systems GmbH, as well as components and plant services for Zeppelin Power Systems GmbH. In addition, a relevant share of the procurement volume is attributable to vehicles for the rental business and to the company’s own field service.

Expenditure for the organization’s own needs, various services, such as energy supply, IT solutions or consulting services, are also included in procured services and supplies. With the exception of the trade relationship with Caterpillar Inc., procurement by the German companies takes place predominantly in national or western European markets.

Supplier selection and assessment to monitor and safeguard our requirements

Suppliers who have a relevant influence within the supply chain are checked for suitability before the initial order is placed. This check is carried out, for example, on the basis of obtained supplier self-assessments, audits and credit checks and, if necessary, further research. In addition to questions on economic and technical production suitability, the collection of data as part of the supplier self-assessment comprises questions regarding certified systems for data protection, energy management, environmental management, occupational health and safety, and quality. In addition, a CSR questionnaire, which is primarily used for strategically relevant suppliers, is used to check the suitability of suppliers with regard to CSR standards.

Depending on the annual procurement volume and after delivery or performance, our suppliers are assessed to see how well they fulfilled various criteria. These criteria include variance rate, pricing, punctuality, complaints rate, environmental and social responsibility, and innovative capability. The supplier evaluation serves as a tool for the ongoing monitoring of the partnership and shows action areas for any necessary improvements. This is one of the most important tools for improving quality and therefore for optimizing the costs of materials and processes.

Progress in supplier management

The main objective of the procurement policy is to develop and maintain stable and partnership-based business relationships with suppliers so as to meet the requirements of internal and external stakeholders. This requires that the selected suppliers meet the requirements set by Zeppelin in terms of quality, adherence to deadlines, price, cooperation, sustainability, and integrity. The degree to which they meet these requirements is checked and expanded as part of regular supplier evaluations. The term sustainability covers ethical, social, economic, and ecological aspects that are rated with an equal weighting. To determine the baseline and to be able to determine the necessary measures based on this, the companies regularly carry out the checks mentioned in the following section.

In addition to fulfilling qualitative requirements, Zeppelin expects its suppliers to comply fully with legal obligations and to recognize and comply with the basic values anchored in the Supplier Code of Conduct. This is set out in framework agreements or in project-specific agreements.

For Zeppelin, sustainability in the supply chain also means ensuring security of supply with materials and services, especially for Zeppelin customers. Regardless of the size of the purchasing volume, all suppliers are therefore checked for their relevance within the supply chain, and strategic suppliers are identified. These suppliers are checked in particular in terms of their economic stability.

The relevance assessment, which was previously based on annual purchasing volumes, was replaced by a revenue-independent risk assessment. If Zeppelin becomes substantially aware of violations by a supplier in the areas of the environment, compliance or human rights, a separate review will be conducted to determine and evaluate the severity of the violation. If it is not possible to implement satisfactory remedial measures, the business relationship can ultimately be terminated. Violations of the Zeppelin Code of Conduct can also lead to termination of the cooperation. The risk assessment described above was made more concrete in 2022 and standardized for all companies. Implementation is set to take place from 2023. The procedure has been laid down in a Group policy. Particular attention is paid to implementation of the Supply Chain Due Diligence Act of the Federal Republic of Germany adopted in 2021. After creating an overview of the procurement processes and direct suppliers, an initial abstract analysis of industry-specific (specific product groups, industries, etc.) and country-specific (supplier site) risks is created. The second step involves the measurement and prioritization of the identified risks. Based on the criteria such as the supplier’s own influences, the hazard potential, own causation and causation of the supplier, an overall assessment of the risks is then carried out according to low, medium, and high priority.

Measures to intensify sustainable supplier management

To intensify the processes for supplier evaluation and controls and to comply with the requirements of the Supply Chain Due Diligence Act, a corrective action plan was created in 2022. The measures formulated in the plan are to be rolled out in 2023. For example, a new procedure for supplier checks was developed, which also defines responsibilities. In addition, a procedural instruction on preventive and remedial measures in the supply chain was created, which includes checklists or action plans for (on site) supplier audits. The future procedure will therefore be described in more detail in the next Sustainability Report.

¹ The following companies have agreed to follow the Lead Buyer Concept: Zeppelin GmbH, Zeppelin Baumaschinen GmbH, Zeppelin Rental GmbH, Zeppelin Power Systems GmbH, Zeppelin Systems GmbH. Zeppelin Österreich GmbH and Zeppelin CZ s.r.o., including their subsidiaries, participate in the Lead Buyer Concept and benefit from the resulting procurement benefits and Group synergies as far as possible.

² This includes the cost of materials included in the cost of sales.