Vogl: Which role does supply chain management play nowadays in a global business like ENGEL Group? Are you able to keep your supply chains up and running despite the current situation? Which role does pricing play in procurement?
Pernsteiner: To cut a long story short, yes, we managed to keep our delivery promises. That has always been our top priority. And, prices continue to play a role in procurement – to a possible extent. We produce injection moulding machines which are used in the manufacture of plastics parts and components as well as products for daily use. We are market leaders in Europe and the USA for machines with more than 1000 to clamping force and are active all over the world. We have nine production plants in Europe, Asia and North America as well as subsidiaries and representatives in over 85 countries. Our procurement is centrally organised, which means that all strategic decisions are made at our headquarters in Schwertberg, Austria. My team and I are working in tandem with our international offices in Asia, Turkey and Mexico to ensure an optimal service in these supplier markets.
Sales continue to do well, which means we need smooth supply chains. Our advantage is the energy efficiency of our machines. Our customers have stepped up replacement investments to save more energy and operate sustainably. As injection moulding makes up about 25% of the production costs, our machines can reduce this proportion by about 30%. That is why both delivery capability and delivery reliability are key factors for our business.
Vogl: How does ENGEL identify risks in the existing supply chain?
Pernsteiner: We conduct supplier assessments and hold supplier performance meetings for our main suppliers every year. Besides the hard facts, we also look at all other relevant factors, such as quality, technology, logistics, procurement as well as customer service. We evaluate the performance, document deviations from the “mean value”, the “best of” of our suppliers as well as those concerning the “commodity”. For us, transparency is not a lip service but part of our everyday reality. Of course, we communicate the results of our assessments with our suppliers and show them where there is room for improvement.
During our performance review meetings with our suppliers, we jointly agree on the measures that will be binding for the next year. At ENGEL, risk management is at the top of the agenda, which is why it also defines the way how we collaborate with our suppliers.
Vogl: How do you select new suppliers?
Pernsteiner: We differentiate between procurement parts and engineering parts. We select suppliers for procurement parts via a market enquiry. Suppliers for development parts provide components, such as control units which have been defined in year-long development processes. Following a concept competition and a strict selection process, we jointly carry out further engineering work. When it comes to these types of components, we cannot simply change from one supplier to another, which is why we carefully select our engineering suppliers. However, including sub-suppliers in the engineering phase is currently difficult. We have therefore adopted a dual and multiple supplier strategy with global diversification almost everywhere to protect ourselves against supply chain risks and we try to follow the same strategy for engineering parts. We know that this may come to an extra cost. It has, however, paid off during the crisis. We are consciously spending more money to secure our supply chains and maintain customer promises. That is why we also buy semiconductor chips from the secondary market.
A diversified procurement strategy via several continents usually comes with a cost advantage as well. An example is the sheet metal we purchase in China: Despite high transport costs and tariffs, buying sheet metal from China is sometimes cheaper than buying it in Europe.
Vogl: Which methods to you use to evaluate suppliers?
Pernsteiner: We conduct on-site assessments to evaluate quality capabilities – so-called Rapid Plant Assessments (RPA) – irrespective of the location of our suppliers. It is a simple and effective method that was developed in 2007. Only a few pages are needed to show 9 topics for the on-site inspection. They range from maintenance and service, order and cleanliness, parts and logistics, material and process flow to quality management, governance and compliance criteria. Nowadays, our assessments also include ESG criteria, such as environment and humane working conditions. The result of the RPA (based on a traffic light system) determines whether the supplier receives an unrestricted release for quotation requests and nominations (green) or whether improvements must be made (yellow). In case of a lack of stability or a supplier reorganisation, the supplier does not receive any requests for quotation (red).
Our RPA approach has been successfully used, has increased quality, and has reduced risks. It features 5 characteristics:
Vogl: Does this also mean that the multiple crises have improved the maturity level of ENGEL’s risk management, and especially that of its supply chain management?
Pernsteiner: We have been well positioned for years and have implemented a group-wide enterprise risk management system. But, yes, the dynamics of the multiple crises somewhat drive our group’s risk management forward. Already back in January 2020, before the first Covid pandemic lockdown, we set up a task force. Today, this task force is permanently active in anticipating changes in the risk landscape and helps us to flexibly adjust to changes in the market.
As part of our strategic focus, we are setting up our digitally networked production with facilities in Austria, Asia and the US and are using our global data base with matching numbers, key figures, and standards. Our production takes place where quality, time and costs are best met. The availability of materials, punitive tariffs, transport routes and costs, our competitive advantage, and the availability of skilled labour are some of the factors we consider as well
About Max Pernsteiner:
Vice President Global Supply Chain ENGEL Austria GmbH
- Graduated in business informatics at the Johannes Kepler University in Linz
- Extensive experience in procurement and supplier networks in the automotive industry
- Successful localisation of (sub)assemblies and finished products in best-cost countries
- Responsible for ENGEL’s global production network, supply chain and procurement since 2018
- Volunteers in supporting disadvantaged children and families
ENGEL is one of the leading manufacturers of plastic injection moulding machines. The Group today provides all technology modules for plastics processing from a single source: injection moulding machines for thermoplastics, elastomers, and automation, including individual components which are equally competitive and successful on the market. With nine production plants in Europe, North America, and Asia (China, Korea) as well as subsidiaries and representatives in over 85 countries, ENGEL provides customers all over the world with optimal support, new technologies and cutting-edge production plants and is a driving force for their competitiveness and success.
Vice President Global Supply Chain
ENGEL Austria GmbH
General Manager GrECo Risk Engineering
T +43 5 04 04 – 160
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