Volvo 2005 Annual Report Download - page 14
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...and continued
efficiency
enhancement...
10 Volvo Group 2005
Reduced costs
With the aim of reducing the costs of developing and manufacturing products, the Group
establishes systems and structures for the transfer of technologies and best practices.
Common production methods and internal processes are increasingly being used, which
creates flexibility and efficiency. In addition, the larger volumes make the Volvo Group an
attractive business partner, which increases the possibilities of attracting the best suppliers.
We are working on increasing the degree of shared components and utilizing shared mod-
ules. For example, Volvo Powertrain has developed two Group-wide engine platforms that
gradually will replace the previous 18 engine platforms. This will be occurring in pace with
the introduction of new products in the coming years. We are engaged in increasing num-
bers of Group-wide development projects, often in cooperation with selected suppliers.
Flexibility
An important task in the internal efficiency enhancement work is to achieve a more rapid
adjustment to fluctuations in the economy. This involves both the ability to increase pro-
duction and sales in upturns and to reduce them in economic downturns. This trend also
requires increased flexibility among suppliers.
Capital rationalization
Since 2001, working capital turnover has been significantly improved, mainly for inventor-
ies and accounts receivable. In combination with the increased profitability, the capital that
has been released has created a strong cash flow, which has enabled the Volvo Group to
engage in product renewal throughout the entire business cycle. In the coming years work
in this area will focus on using sales and administrative resources more efficiently.