The far higher volume of orders taken in 2011 compared with 2010, the accompanying rise in material requirements and the generally high prices for commodities presented considerable challenges to the KION Group purchasing unit in the reporting year. Bottlenecks in the supply chain that had first emerged in mid-2010, particularly for electronic components, continued into 2011. The high level of order intake also generated bottlenecks in the supply of industrial tyres. There were only slight delays in engine deliveries as a result of the earthquake and tsunami in Japan, and this hardly affected the KION Group's supplies at all. Close partnership with suppliers protected the KION Group's procurement flow at all times.
Interdisciplinary teams in supply development had been set up in late 2010 to identify and systematically leverage potential for improving the Company's cooperation with suppliers. The teams offered workshops to the suppliers – particularly for small and medium-sized enterprises – as well as concrete support on refining lean management, redesigning the layout of their factories and improving supply sources and terms. The steps taken were very well received by the KION suppliers and proved exceedingly successful thanks to the great flexibility of the suppliers and their exceptional willingness to optimise processes.
The KION Group's costs for commodities in 2011 were very different to what they had been in 2011. Whereas steel plate rose by a moderate 7 per cent on average, prices for scrap and natural rubber rocketed by over 20 per cent and 26 per cent respectively in the middle of the year. However, the sovereign debt crisis caused the price of certain commodities to decline from mid-2011 onwards, although this did not compensate for the sharp year-on-year rises seen in the first half of the year. Steel accounts for the largest share of the volume of commodities purchased by the KION Group. Prices for steel peaked in the first half of 2011 and fell continuously after that. In contrast, prices for scrap only stopped climbing at the end of last year. Copper prices reached a record high in March 2011 but tended to decline as the year progressed.
As the KION Group mainly uses processed materials and components in the production of industrial trucks, increases in the market price for commodities do not impact fully and directly on the Group's cost of materials. The KION Group also has long-term agreements with its main suppliers, under which it obtains key components at fixed prices. As a result, sustained price increases are only felt at a later date. In some cases, for example batteries, rises in purchase prices can be passed on directly to end customers.
The cost of materials in the KION Group increased by 3.7 per cent overall in 2011 compared with 2010. As a result of the KIARA performance enhancement programme, the KION Group realised potential cost savings of 1.3 per cent. To ensure an uninterrupted supply of critical components, the KION Group secured additional capacities from some of its suppliers. However this was only possible by paying higher prices. By the end of 2011, the cost of materials had climbed to €2,244 million (2010: €1,714 million) due to the far higher order intake.