German rail firm poised to procure parts in China

Former railway man Werner Kruger shines the bright red wheels of a steam locomotive of series 52-4900 at the Museum of the Deutsche Bahn in Halle/Saale, Germany, Oct 25, 2015. [Photo/IC]

German railway company Deutsche Bahn AG is opening its first international procurement office in Shanghai and has identified some 40 potential suppliers of train products in China.

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

"Especially for the large orders we could announce in the next years for locomotives and high-speed trains, we are looking at worldwide procurement markets," said Uwe Guenther, chief procurement officer, 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 said.

The Shanghai office 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, DB's head of international procurement office in Asia.

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

Deutsche Bahn plans to spend 10 billion euros ($10.7 billion) annually in the next five years, most of them on upgrading its network and rolling stock.

During the period, it also wants to double the number of suppliers from abroad, who currently account 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 systems. "We both expect certain dates of delivery and we expect the trains to be delivered exactly on that date."

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 later.

"A couple of years ago, the Chinese products appeared convincing only in terms of prices. Now, they've reached a high standard of quality," Grothe said.

Guenther said 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 the next few years.