A leading automotive supplier was finding it increasingly difficult to achieve the annual price reductions demanded by OEMs through higher productivity and better purchasing conditions. When a new purchasing manager with no experience in purchasing seemed overwhelmed by the task of designing the optimization programme, the company management commissioned the current interim manager to lead the project.
As a management consultant hired by the company and coach to the purchasing manager, the purchasing expert took on the task of developing effective optimization levers for the product groups on the basis of a three-week audit phase and achieving sustainable savings as quickly as possible in collaboration with the purchasing organization.
Numerous deficiencies identified in the purchasing organization
Before the project began, the company's purchasing was decentralized across the plants in Germany and abroad. The local departments operated largely autonomously without coordination with the purchasing management. There was often a lack of developed product group strategies with supra-regional bundling potential and a view of the procurement markets with their risks and opportunities. This had led to monopoly suppliers and a large number of small suppliers. There was hardly any exchange within the supplier portfolio. Purchasing had also failed to systematically develop challengers in the product groups. In many cases, suppliers were selected according to the "church tower principle".
In addition, there were no targets for Purchasing. As a result, the value contribution was not measurable. There was a complete lack of supplier management for supplier evaluation and development. Purchasing only used commercial and traditional purchasing levers. There were no systematic approaches to product cost optimization through cost value engineering and design-to-cost approaches.
Strategies developed for product groups and supplier portfolio
The current interim manager began the project with an analysis of the strategic product groups in relation to the supplier portfolio, previously implemented purchasing levers and the respective purchasing markets for Europe and the USA. On this basis, he drew up a "Value Creation Plan". This plan included all operational implementation levers for reducing material costs as well as cost value engineering measures in coordination with engineering, supplier evaluation and the system for measuring purchasing success. This also included an assessment of potential for each product group and proposals for the negotiation pipeline. The team also drew up product group strategies for the major product groups with strategic input from the interim manager, in which the strategic objectives and a target supplier portfolio were defined.
Global product group management designed and implemented
In the next step, the interim manager drew up a concept for realigning and centralizing the decision-making structures for strategic product groups. He coordinated the plan in detail with the management board, the purchasing management, the local purchasing organizations and the lead buyers. A resolution was passed by the Executive Board to gradually roll out the concept to the other European, American and Asian locations following its introduction in Germany.
The interim manager was entrusted with leading the implementation. As lead negotiator, he personally conducted around 50 negotiations with key suppliers in Europe and Asia and was also available for all escalation cases. He also coordinated orders with the purchasing manager on a daily basis in a so-called "Purchase Orders Power Room" and clarified whether and how these could be integrated into any optimizations of conditions.
Costs of the vulnerable purchasing volume reduced by 6 percent
In the course of renegotiations and renegotiations, tenders and new awards, the savings grew continuously to higher double-digit million figures. The structure with monopoly suppliers was broken up and competition was created through tenders and the development of competition in the supplier portfolio.
The interim manager contributed further success factors to the sustainability of the savings. For example, he improved the qualification of the lead buyers "on the job" in negotiation management and innovative negotiation formats. He also introduced robust processes and tools for measuring success in purchasing as well as a degree of rigor logic.
