International purchasing reorganized for jewelry group

A global company in the jewelry industry with more than 25,000 employees had failed to adequately manage its purchasing during years of growth. Instead, numerous purchasing organizations were organized decentrally or independently in various silos. Each unit was primarily focused on handling its "own" operational ordering and supply processes. The current interim manager was commissioned - at the time as Chief Procurement Officer - to rebuild international procurement for the company.

Wild growth at the beginning: more than 10,000 suppliers and maverick buying

Even at the start of the project, the pressure to act was great, as the company's units were largely not connected at all. For example, there were more than 10,000 suppliers, no material group structure and a lack of human resources. The coexistence of several ERP systems made data management difficult. For example, purchasing data was only used for accounting purposes - and was not analyzed further.

This led to uncontrolled growth. Maverick buying by the individual business units, i.e. procurement without the involvement of a higher-level purchasing organization, had unnecessarily increased expenditure. Purchasing was also often organized far from the market: for example, a high proportion of the purchasing volume for products, indirect requirements and services was accounted for by Europe. The significantly higher share of sales, on the other hand, was generated in Asia.

Ten-point master plan developed and implemented for optimizing procurement

After the analysis, the interim manager agreed the optimization and savings targets with the management. Based on this, she developed a master plan. This master plan defined the following steps and objectives

1. External and internal benchmarking: The interim manager initiated external benchmarking with regard to the maturity of the procurement organization and resources as well as internal benchmarking with regard to the requirements of the business units and derived the strategy for international procurement from this.
2. Development of an overall organizational concept: In order to find the right balance between the purchasing lever of bundling in categories and proximity to the business units, the interim manager set up a matrix organization with material group managers. These were distributed across the main European locations and Asia - close to the business partners in production or the sales markets. Corporate Procurement reported to the CFO.
3. In addition, the interim manager designed and implemented a Center of Excellence for methods, processes, systems, sustainability, procurement controlling and procurement marketing.
4. Setting up meeting structures: To promote the exchange of know-how and mutual learning and to support decision-making processes, the interim manager initiated and led purchasing boards and other panels at various levels.
5. Developing and filling purchasing roles: The manager created quantitative and qualitative transparency regarding the distributed resources with purchasing activities and mapped the qualification levels. Building on this, she developed and harmonized the roles in international procurement. The framework resulted in an HR concept with cross-functional applicability.
6. Building a spend cube: The development and implementation of a category strategy requires transparency about spending: Who buys what from whom and at what price? The interim manager answered these questions by setting up a spend cube.
7. Setting up pilots: The next step was to establish cross-functional category teams to show stakeholders and management different approaches beyond negotiations: from bundling to supplier reductions, redesigning products for greater sustainability and make-or-buy decisions.
8. Development of a system strategy: Based on the SAP ERP systems, the interim manager and her team selected and implemented e-procurement systems for operational and strategic purchasing as well as supplier management.
9. Harmonization of processes: At the major locations, the operational purchasing functions were bundled below the finance and supply chain managers and the data structures (vendors, material groups) and processes were gradually harmonized.
10. By standardizing the data (vendors and material groups) and harmonizing the processes, the number of suppliers and maverick buying were significantly reduced.

Supplier and supply network built up from own plants and suppliers

After successfully setting up the pilots, the interim manager and her team were able to continue rolling out socially responsible procurement. Through job rotation and training, all employees found a place in the new organization. In addition, there were targeted new recruitments.

In the strategic area, the company specifically built up new suppliers with a view to innovation, sustainability and non-traditional purchasing categories such as media under the leadership of the interim manager. This created an interconnected supplier and supply network consisting of the company's own plants and external suppliers. As a result, central purchasing is now accepted as a value-adding business partner, all the more so as the savings targets of the reorganization were exceeded.