December 17, 2025 5 min read
Two worlds collide in the rail industry: on the one hand, there are large corporations, including state railways, with billion-dollar budgets and highly structured purchasing departments; on the other hand, there are small, flexible SMEs with lean structures and limited resources. The differences in procurement could hardly be greater. While large companies often rely on long-term strategies and standardized processes, smaller suppliers are forced to act pragmatically and react quickly. In this blog post, we highlight the spectrum between these two extremes – and show how different procurement actually looks in the rail industry.
Different speeds of procurement processes
Large corporations work with long-term framework agreements and strict approval procedures. Before a new vehicle, spare part, or similar item is purchased, the procurement requirement goes through several approval stages. This takes time, as numerous departments such as cost centers, quality management, and in some cases even the executive board must give their approval. This centralization makes procurement predictable, but also slower.
Medium-sized companies, on the other hand, are often more agile. Here, responsibility falls on a few people, usually the management or purchasing managers. Without complex committees, orders can be placed more quickly. This shortens delivery times, but increases short-term pressure on the budget and liquidity.
Process structure: flexibility vs. standardization
Corporations in the rail industry rely on standardized processes. In most cases, there are specialized purchasing or procurement departments for different product groups (e.g., infrastructure, vehicles, etc.). These teams work according to established rules. They use central procurement portals and standardized processes to efficiently handle bulk purchases. One advantage is economies of scale: large order quantities allow better prices to be negotiated. A disadvantage is that these processes are often rigid and leave little room for individual solutions.
SMEs generally offer significantly more flexibility. Purchasing is handled with less formalism. Spare parts or vehicles can be searched for and ordered spontaneously on the market. Flat decision-making processes help to react quickly. Often, companies rely on proven supplier relationships and individual solutions. However, there is a lack of standardization, which increases the risk of incorrect orders or higher costs.
Decision-making: centralized vs. decentralized
Decisions within a corporation are usually centralized. A purchasing department or headquarters sets the framework conditions. Regional or operational divisions report their requirements, but final approval is granted centrally. This structure allows large volumes to be bundled and a uniform strategy to be pursued. However, the distance from the grassroots level can lead to the individual requirements of individual locations being overlooked.
In smaller companies, decisions are often made decentrally, without formal approval bodies. The manager decides directly on site what is needed. This makes the procurement process faster and more accurate. One disadvantage is that there is less bargaining power with suppliers and often less experience in complex procurement procedures. Nevertheless, individual companies can react quickly to market changes – for example, when a new order comes in at short notice or spare parts are urgently needed.
New acquisitions and used vehicles
There are further significant differences when it comes to purchasing new trains and spare parts. Large corporations plan new purchases on a long-term basis and usually within larger project structures. They draw up multi-year investment plans and order entire vehicle fleets, for example. The advantage: new vehicles are state-of-the-art, more energy-efficient, and fit into a uniform fleet strategy. However, such purchases are cost-intensive and involve long delivery times – but they are financially feasible and strategically sensible for corporations.
Another difference lies in the spare parts strategy. Corporations purchase many spare parts in advance and often store them in large, central warehouses. This is possible because they have sufficient space, budget, and structured warehouse logistics. By stockpiling in this way, they ensure the availability of critical components and reduce downtime, even if this can result in high inventory levels.
Who is responsible for maintenance – the owner or the operator – also plays an important role, as this division of roles has a significant impact on procurement, cost responsibility, and decision-making processes. Today, smaller companies in particular are often only operators of the vehicles due to modern leasing models, but this separation of ownership and operation is also becoming increasingly important in large corporations.
In addition to the modern leasing models just mentioned, many smaller companies are also turning to the use of used vehicles as an alternative. Such railway companies often purchase only a few vehicles and prefer to use cheaper used vehicles in order to keep investment costs low. Many of these companies also operate older models for which new spare parts are only available to a limited extent. In some cases, this even creates a natural dependence on the used market.
Smaller companies often make ad hoc purchases in order to avoid storage costs and not tie up capital unnecessarily. Instead of maintaining large inventories, they procure parts as needed – often used and/or refurbished (as mentioned above) from the inventories of other rail operators. Such components and vehicles can be easily obtained via specialized platforms, such as our Europe-wide marketplace, greatly simplifying procurement processes.
Summary
Procurement processes in the rail industry differ significantly between large corporations and SMEs. Corporations benefit from standardized processes, centralized decision-making, and large-scale projects for new purchases. This reduces costs for large quantities, but leads to slower, more complex, and rigid processes. SMEs, on the other hand, operate flexibly and quickly. Decisions are made directly on site. They more often resort to used vehicles or spare parts.
Overall, it is clear that corporations can optimize their purchasing strategy through bundling, but are less agile. Smaller companies, on the other hand, score points for speed and adaptability, but must be prepared for higher prices or less favorable terms.
