Roundup: Deutsche Bahn to open procurement office in Shanghai next week

German railway company Deutsche Bahn (DB) said on Monday that it will open its first international procurement office in Shanghai next week and has identified some 40 potential suppliers for train products in China.

Deutsche Bahn, which was at loggerheads with its home suppliers like Siemens over delivery delays in recent years, is looking beyond German and European border for alternative reliable suppliers.

"Especially for the large orders we could announce in the next years regarding locomotives, regarding high speed trains, we are looking for worldwide procurement markets," said Uwe Guenther, Chief Procurement Officer of Deutsche Bahn.

"We would like to have a competition, if we announce an order, then we would like to have the best supplier as a partner," he added.

As the first step, the new procurement office set to be opened next Tuesday in Shanghai will help the German state-owned company to find Chinese suppliers for rail vehicle replacement parts and infrastructure materials.

"We have in these two categories quite high demand and we are really confident that we will find suppliers for that in China," said Michael Boback, Head International Procurement Office Asia of DB, adding that his office is responsible for procurement activities in Asia, but will mainly focus on purchases in China at first few years.

According to him, some 40 potential suppliers including China Railway Rolling Stock Corporation (CRRC), the world's largest train manufacturer, and Taiyuan Heavy Industry (TYHI), a Chinese industrial machinery maker, have been identified through previous contacts.

Deutsche Bahn plans to spend 10 billion euros (about 10.7 billion U.S. dollars) annually in the next five years, most of them on upgrading its network and rolling stocks. During the period, it also wants to double the number of suppliers from abroad, which currently accounts for less than 10 percent of all its suppliers.

"We definitely need best suppliers, we cannot just stick to the ones we had earlier," said Jan Grothe, Head of DB's Procurement Principles and IT System.

"To be reliable on the plans we agreed is the most important thing. We both expect certain dates of delivery and we expect the trains to be delivered at exactly that date we agreed on," he said.

DB's plan to buy train products in China was disclosed in May this year. Its management visited several Chinese companies and attended a sourcing fair in China thereafter.

"A couple of years ago, the Chinese convinced us most of the times with prices only. Now what we've seen is that they've reached a high standard of quality," Grothe said, citing high productivity and flexibility to customers' changing needs as other advantages that Chinese companies have in competition.

"They are absolutely open for feedback and changes... They took everything we find as the new beginning of improvement and getting better, this is something which is quite hard in Europe," he said. "(In Europe), if our quality engineers find something which is not meeting our expectations, they (suppliers) are not happy. This is different in China. Every time we spoke to the people in the plants, they invited us actually to give a feedback to give ideas about how they can get better and that's impressive."

For Guenther, the quality development of Chinese products was also impressive.

"The willing of all the employees to bring the quality into the products for the customers, that's what makes me very optimistic that we doing at the moment a right step," he said.

Guenther revealed that DB might start purchasing wheel sets from Chinese suppliers earlier than 2017 and buying high speed trains and locomotives from China could also be an option in next few years.

"They are now rising to a level of quality which is comparable with the European level and are on the right place to take part of the competition in Europe," he said. Endit