At Scania, environmental issues have been important since the mid 1970s. Since then, Scania has continuously worked to reduce the environmental impact from not only its own operations but also from the trucks, buses and engines that the company manufactures.

Scania’s environmental work is a part of the daily operations and the company’s ambition is to always be one step ahead of future environmental legislation. This is reflected in one of Scania’s values which is ‘elimination of waste’. Scania’s strategy, along with continual improvements, has helped significantly in achieving its environmental goals.

Since the early 1990s, Scania has improved its efficiency by five percent a year. “Now we must sharpen our efforts,” says Anders Nielsen, Head of Production and Logistics.

Where and how is Scania investing in increased capacity?
“The investments will take place over the next few years and mainly at our existing cab, engine, gearbox and axle production units in Sweden. These units are still a very important hub in Scania’s operations.
“The investments will start to be noticeable in the second half of 2011. They consist of a combination of continued improvements in our production working methods plus some new machinery. But we don’t need to build any new production units. We can achieve a capacity of 150,000 vehicles within the same plant area. In other words, this will involve comparatively small investments, though with a large impact and high cost effectiveness.”

Scania’s production units in Sweden are located far from future growth markets, for example in Asia and the Middle East. Is this a problem?
“Not at all, we have built regional product centres in strategic locations around the world to move closer to customers. The idea behind these centres is that final vehicle assembly should occur as close to the customer as possible, even though most vehicle components come from our advanced production units in Europe and South America. Today we have regional product centres in Russia, South Africa, Dubai, Malaysia, Taiwan and South Korea.”

How will Scania be able to boost production with an unchanged number of employees?
 “By building further on our leadership model, in which we involve all employees in bringing about continuous improvements. This continuous effort − the Scania Production System (SPS) − is a powerful instrument for increasing productivity and an important element in our success. During the 2008-2009 crisis, we also placed greater emphasis on further training of our employees in these working methods. This provides a very good foundation for the future.”

What are your goals for production efficiency?
“Since the early 1990s, we have improved efficiency by five percent a year, which is very good. But we will have to sharpen our efforts to successfully expand to 150,000 vehicles with unchanged staffing by the next cyclical peak. We are working towards improving our efficiency from about eight vehicles per production employee per year today to 15 during the next peak.”

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From the new Delivery Centre, Scania will supply complete trucks that are adapted to the requirements and operating conditions that apply in Russia. The establishment of this facility is part of Scania’s strategy to strengthen its position in the important Russian market. 

Scania's delivery centre in St. Petersburg has a technical assembly capacity of about 5,000 truck chassis and 1,500 superstructures per year.

“This facility enables us to move the factory gate closer to the customer, shorten delivery times and greatly improve Scania’s customer support in the Russian market,” says Johan Balck, head of the Delivery Centre in St. Petersburg.

The St. Petersburg facility has a technical assembly capacity of about 5,000 truck chassis and 1,500 superstructures per year. It will initially have about 70 employees.

Scania will work together with a number of locally selected suppliers of superstructures and equipment. Working with local suppliers will mean short lead and delivery times, which will be a major advantage to Scania’s expansion in Russia.

The Russian facility is Scania’s sixth delivery centre. The others are in South Africa, Dubai, Malaysia, Thailand and South Korea.

Since its first sale to Russia a century ago, Scania has delivered about 22,000 additional trucks and buses to the Russian market, most of them in the past decade.

After a sharp downturn in demand during the recent financial crisis, the Russia market is now rebounding.

For further information, please contact Gunnar Boman, Senior Advisor, Scania Corporate Relations, tel +46 8 55389510

Scania has gradually become better at handling fluctuations in demand, says CFO Jan Ytterberg.

“We still have an order backlog that we are working our way through, but the number of orders is indeed declining now. There is overcapacity in the transport industry and it is difficult to get a good grasp of the underlying demand for new vehicles during the prevailing financial market turbulence, with the consequent difficulty for our customers to obtain financing. Making ten-year forecasts is easy. It is harder to say how things will be going one or two years from now,” says Jan Ytterberg, Scania’s Chief Financial Officer (CFO).

The economic slowdown following the home mortgage and financial crisis will not leave Scania untouched. But the company has gradually become better equipped to cope with fluctuations in demand. The latest example is Scania’s global production programme, which means that the same truck series are being manufactured in Europe and Latin America. The advantages become clear when order bookings weaken in the European market and Scania meanwhile sees strong demand in South America and Asia.

“It was good timing that the global production programme became a reality right now. We can shift production from Latin America to Europe in order to achieve more balanced capacity utilisation.”

Another way of dealing with fluctuations in demand is to ensure that the company has the right staffing for every situation. Scania has a flexible system for its production employees; a “time bank” that serves as an initial regulator in various cyclical situations. Put simply, the system operates like a bank account. Time can be deposited in the bank and withdrawn according to production needs. The company also uses staffing companies as well as temporary contracts. Not renewing temporary contracts is another way of adjusting production to lower demand.

Scania focuses on making strategic components, especially those related to fuel consumption, such as engines, gearboxes and axles. Everything else that is not regarded as strategic can be outsourced. In this way, Scania keeps its own value-added down. Of all the components that a truck chassis consists of, in-house production today accounts for only 30 per cent of the cost. This figure was pre¬viously 40 per cent. If superstructures are included, Scania’s own value-added is substantially lower.

“This gives us a more flexible cost structure. But we are continuously re-assessing our cost structure, and now that we are entering an economic slowdown, we have to tighten up our operations.”

This means that, starting in November, Scania will be adjusting its production rate.
“Scania’s cash flow has been strong over a long period. This is partly due to good sales and partly because we have focused on not tying up capital unnecessarily − in trade receivables or inventories. When demand weakens, it becomes even more important to focus on cash flow. If truck sales decrease rapidly, we build up inventories and then we have to act and lower our production rate,” Mr Ytterberg says. Scania’s cash flow is a prerequisite for being able to act independently in a period of credit market turbulence.

Scania was trimming its production even during the boom period. One example is the transfer of gearbox and axle production to Södertälje, at the same time as certain non-strategic parts were outsourced to sub-contractors. Meanwhile Scania concentrated its European parts warehouse operations in Opglabbeek, Belgium. Altogether, these measures will provide annual savings of SEK 300 m. per year, with full effect starting in 2009.

Text: Petra Lodén Photo: Dan Boman