Since 2020, global supply chains have been faced with exceptional political, social and economic circumstances due to the pandemic, the semiconductor shortage and the Russia-Ukraine war. Lamborghini’s resilience has ensured that the company remained extremely solid in this period as it not only took on these challenges but also achieved record-breaking results on the sales and financial fronts. What strategy did Lamborghini adopt to ensure that production could continue uninterrupted? What approach is it taking as it prepares for the future? Silvano Michieli, chief procurement officer at Automobili Lamborghini discusses these topics, as well as the company’s cooperation with the Ukrainian supplier, Leoni.
How is Lamborghini reacting to the supply chain challenges presented by the current geopolitical situation?
“First Covid, then the issue with semiconductors, not to mention the conflict in Ukraine and protectionist policies: against this backdrop, Lamborghini has been taking risk limitation measures and securing its supply chain. One of the main initiatives that we’ve taken here has been to forge even closer ties with some of our strategic suppliers, going from a more traditional ‘Supplier-Client’ relationship to one that is more of a partnership. At the same time, we are revising our processes to a more proactive, analytical approach. This will enable us to anticipate any new problems in the industry. Now, more than ever, we firmly believe that it’s essential to take a problem-solving approach in an international environment that will present more and more challenges and difficulties.”
Referring specifically to the war in Ukraine, Lamborghini is in close contact with its suppliers in the country thanks to an emergency task force established by the Volkswagen Group that is responsible for ensuring that a steady flow of supplies continues to arrive. One of the stories that has emerged concerns the cooperation with Leoni, a company in the west of the country that produces wiring for the Huracán. Tell us more.
“Leoni’s staff are having to make huge sacrifices to keep their manufacturing processes moving and thus keep driving the production capacity of their country. The time they spend working is interspersed with curfew periods when they have to take shelter in the underground areas of the production plant. The staff show heroic amounts of courage, devotion to their work and love for their country, and Lamborghini is enormously grateful to them.”
If Leoni’s production activities are brought to a halt, how will you handle the situation?
“Our approach is based on the idea of duplicating rather than reallocating, with a ‘dual production’ strategy. Thanks to our help, our Ukraine-based suppliers are working to ensure that some of their plants in Europe can count on the same production capabilities. It means that our relationship with our established suppliers will remain unchanged. They will continue their production work in the factory in Ukraine, while we support the process of duplicating the plant outside the theatre of war. Although we hope it doesn’t happen, we’ll be ready if the war brings production in Ukraine to a halt again. It’s a way of showing our trust and gratitude to the staff in our supply chain in Ukraine, who strive to keep production going every day.”
All of this shows how Lamborghini considers and treats its suppliers as partners in its projects. The roles are sometimes even reversed: Lamborghini often acts as a consultant in the procurement of raw materials such as carbon and microchips. However, in order to be selected as approved suppliers in the first place, companies have to go through a rather strict rating process. How does Lamborghini select suppliers? What are the necessary indicators and other requirements?
“We place great importance on checking the financial reliability and sustainability of our suppliers and their supply chains. While the economic side of things must be considered, at the same time we’re having to deal with significant financial strain caused by the series of global crises that we’ve seen in recent years. As well as the margins, we now also look very closely into the solidity of our suppliers. The increasingly partnership-like nature of the relationships that we tend to establish enables them to learn about our requirements from the very beginning and optimise future supplies in terms of time and costs. In addition to financial stability, we also pay close attention to development performance and innovations, quality and logistics, in terms of delivery security.”
One of the keys to the success of Lamborghini’s procurement strategy is the balance between extremely well-organised big suppliers with connections to the Volkswagen Group that can provide certain technologies and specific components, and a number of smaller, highly specialised suppliers that can provide specific products for the unique Lamborghini manufacturing systems. In terms of synergy, what are the greatest benefits that this brings to the supply chain?
“There are considerable advantages to being part of a group like Volkswagen, and this is demonstrated by situations such as the semiconductor shortage. Lamborghini has one of the highest contribution margins in the group, so it is prioritised when it comes to supplies. In addition, the Group gives us access to a number of forms of technology that play a crucial role in our evolution. We’re talking about technology that would not normally be within reach of a small company like ours. It gives us exclusive access to innovative solutions, and a clear competitive edge over our rivals.”
Lamborghini is reorganising its stock management along its supply chain because it realises that in the future the biggest risk of irregular supplies will be with the core materials and components. Many economists and historians are talking about a decline in globalisation and the start of a deglobalisation trend. What’s your point of view?
“I think that phenomena like globalisation are irreversible. Numerous geographical areas contribute to the production cycles of items that are made today. In my opinion, an extreme form of deglobalisation is a Utopian, short-sighted idea. I’m more of a believer in rethinking the current supply processes and outlooks, which are in any case undergoing a natural evolution in the industry due to the new circumstances.”