Mercedes-Benz is revolutionising its procurement processes by integrating game theory, digital automation, and circular manufacturing, setting a new standard for cost efficiency, transparency, and environmental responsibility in the automotive industry.
Mercedes-Benz is transforming its procurement strategy through an innovative blend of digital automation, scientific negotiation models, and circular manufacturing, marking a significant step in its drive for cost effici...
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ency, supplier transparency, and sustainability. This strategic overhaul not only aims to cut costs but also supports the company’s long-term production and environmental objectives.
Central to this transformation is the application of game theory, a scientific model of competitive decision-making, which Mercedes-Benz uses to refine its sourcing approach. Christian Netenjakob, Project Coordinator at Mercedes-Benz, explained that game theory enables the company to analytically simulate negotiation outcomes, define binding fairness rules, and identify value trade-offs ahead of supplier discussions. This method introduces a high degree of analytical rigor and removes much of the subjectivity traditionally associated with price negotiations. It ensures that contracts are transparently performance-based. The automotive sector has seen a growing trend in adopting game-theoretic tools, with firms like BMW and Volvo employing similar approaches to mitigate supplier dependencies and manage price volatility linked to raw materials.
Alongside game theory, automation plays a crucial role in enhancing procurement efficiency. Under its partnership with SAP, Mercedes-Benz has consolidated digital systems on the RISE with SAP platform, facilitating cloud-based integration of AI forecasting and analytics. CIO Katrin Lehmann highlighted that the reliability of AI depends on a unified data foundation: “Our goal was to unify that foundation and bring all systems to the cloud.” This integration allows Mercedes-Benz to synchronise procurement and operations data in real time, better predicting cost fluctuations, assessing supplier risks, and forecasting demand across its extensive production network. Furthermore, automation efforts extend to streamlining supplier onboarding and invoice processing, critical functions that have traditionally slowed sourcing cycles in manufacturing.
Mercedes-Benz’s partnership with SAP is underscored by strategic infrastructure updates, including migrating key SAP applications to Amazon Web Services (AWS). This move enhances digital transformation by improving IT flexibility and efficiency, creating room for future innovations. SAP’s integration of AI capabilities, including the AI copilot Joule, supports these efforts by assisting users in navigating business systems through natural language, providing AI-driven insights, and streamlining operations. Moreover, the collaboration between SAP and AWS expands generative AI integration into SAP’s enterprise resource planning (ERP) solutions, enabling businesses to harness AI to boost efficiency, responsiveness, and sustainability.
Complementing its digital advances, Mercedes-Benz is deeply committed to circular economy principles. Its Kuppenheim recycling plant, operational since early 2024, recovers up to 96% of materials from used vehicle components. In 2022 alone, the company recycled over 32,000 tonnes of materials in Germany. European Automobile Manufacturers’ Association data shows that incorporating recycled materials can reduce lifecycle emissions in automotive production by up to 40%, providing a notable competitive edge as environmental regulations tighten globally.
The company is also embracing cutting-edge technological tools such as NVIDIA Omniverse, leveraging generative AI to create digital twins of production facilities. This ‘Digital First’ manufacturing approach allows for detailed simulation and planning of production and assembly lines, enhancing efficiency, reducing defects, and saving time, which are vital for maintaining flexibility in a rapidly evolving industry.
Mercedes-Benz’s procurement overhaul signals a broader shift in advanced manufacturing, moving away from reactive cost management towards anticipatory intelligence. By integrating behavioural modelling, AI-driven forecasting, and sustainable material management, procurement is evolving into a strategic control function. The future competitive advantage is poised to come not from merely negotiating the lowest price but from a nuanced understanding of the long-term cost implications of every decision made today. This holistic strategy not only aims to improve financial outcomes but also reinforces Mercedes-Benz’s commitments to sustainability and innovation in an increasingly complex market landscape.
Source: Noah Wire Services
