A medium-sized company for highly specialized machines with several locations in Germany and abroad (filling machines, balancing technology and diagnostic technology) was experiencing considerable delivery problems, which continued to grow. After failing to eliminate the causes, the management commissioned the internationally experienced interim manager to solve the delivery problems of the production sites in Germany and abroad as project manager in purchasing. After initial successes, the mandate was extended to include the management of strategic and operational purchasing as well as global materials management.
Short-term measures resolve the most pressing supply bottlenecks
In order to resolve the most critical supply problems, the interim manager initially took short-term measures. He implemented weekly status meetings with Sales, Production and Development to coordinate and prioritize bottlenecks and delivery plans. It was also necessary to clarify availabilities with new and old suppliers. In individual cases, the interim manager visited suppliers to ensure the necessary support in escalation meetings. Short-term partial deliveries of critical materials ensured the functionality of the machines. Within a few months, the interim manager succeeded in eliminating the most urgent supply bottlenecks. As a result, the company emerged from crisis status and was once again fully able to deliver.
Analysis: weak points in purchasing and materials management identified
The interim manager identified a large number of challenges in the extensive root cause analysis. The current purchasing strategies and procurement processes proved to be inefficient, which had led to high stock levels and problems in supply chain optimization. The key weaknesses:
- Lack of synchronization between sales and purchasing: Without a coordinated S&OP process, purchasing was unable to procure the required components on time or in the right quantities.
- Overstocking and understocking in the warehouse: Due to the lack of coordination, either too many or too few materials were often ordered. This explained the excessive stockpiling of unneeded materials while critical components were missing.
- High inventory write-offs: The accumulation of unneeded materials in the warehouse led to high inventory write-offs, as many of the components stored were either obsolete or no longer in demand. This resulted in considerable financial losses every year.
Sales and purchasing synchronized in a coordinated S&OP process
For a coordinated S&OP process, the wheels in the company must mesh. This was not the case here. Instead, sales, production and purchasing were characterized by a pronounced silo mentality. The units involved hardly exchanged information, neither within the plants nor between the locations. In order to promote cooperation, the interim manager therefore initiated regular consultations with all relevant stakeholders: from development departments, design and production to quality management, marketing and sales through to supply chain management and purchasing.
Planning of material requirements and capacities secured thanks to new S&OP processes
After the interim manager had strengthened the collaboration, the way was clear for a joint long-term strategy for the continuous improvement of purchasing and materials management. The core element was S&OP processes for better overall planning of material requirements and capacities throughout the company and at suppliers. The interim manager and the team merged these processes and data in the ERP system. Through training in Germany and at the international locations, the interim manager ensured that the new processes sustainably increased efficiency. The optimization of the planning processes also led to a strategic optimization of the supply chains.
Stock levels reduced by 30 percent and aligned with production
With the consolidation of the S&OP processes, the interim manager had a reliable database for the analysis of warehouse strategies, ordering processes, stock levels and MRP data. In an ABC-XYZ warehouse strategy, he identified potential for optimizing warehouse stocks. In this way, it was possible to reduce stock levels by a good 30 percent and at the same time keep the materials that are essential for delivery reliability in stock.
Economy of product development strengthened through project purchasing
In another sub-project, the interim manager made a significant contribution to strategically advancing the economic efficiency of product development. Previously, silo thinking had meant that purchasing and suppliers were only considered at a very late stage in the development and planning processes for product innovations. This had consequences: On the one hand, Purchasing was faced with the difficult task of finding suppliers in good time. On the other hand, the late involvement of the purchasing department made it even more difficult to calculate economically viable target prices. This jeopardized the company's competitiveness. To avoid this, the interim manager established a strategically oriented project purchasing department. In this area, purchasing is now involved in the development of new products right from the start. Among other things, this makes it possible to find new suppliers at an early stage or to incorporate the know-how of suppliers into the developments (make-or-buy solutions). Purchasing also gains time to secure resources at reasonable prices at an early stage. The reorganized project purchasing not only creates greater cost efficiency, but also makes it easier for the company to increase its contribution to value creation.
Procurement and materials management successfully realigned within 14 months
After a total of 14 months, the interim manager handed over procurement and materials management to the new job holder. The interim manager's optimizations proved to be sustainable - with improved efficiency and reduced costs. The delivery problems were permanently eliminated, and the S&OP processes and project purchasing have also proven their worth with product innovations.
