Supply Chain
Management

Suppliers as partners? Collaboration? Connectivity? Foreign concepts in that day! Modern purchasing is different. Today, production lines stop moving if the supplier and manufacturer don't work as partners, and not only at VW. Business periodicals in August 2016 bore headlines such as: "VW supplier dispute affects 28,000 employees, assembly lines stand still because parts are missing". Two angry suppliers had stopped delivering components to the company because they had had enough of López' tactic.

Suppliers are partners with which modern, high-performance companies have a very close relationship. "Supplier integration" are the magic words. Data, information, costs and successes are all shared! Collaboration and connectivity generate a digital unity of suppliers and manufacturers that benefits everyone! Digitalization creates fantastic new options here!

Procurement is of the greatest strategic and operational importance. Why? Mistakes made at the start of the supply chain not only extend all the way through to its end, they tend to potentiate with each step and can lead to costs going through the roof.

Two case examples

A company has numerous buyers at various venues. The Finnish buyer negotiates with the same supplier as his Swedish colleague, but they don't come together to exploit the synergies that bundling their needs would achieve. Companies with modern purchasing, on the other hand, generally do a pretty good job of that!

But sometimes the case is a little more complex: the three railways of neighboring countries often use the same trains. But each country purchases not only the locomotives and wagons individually, they also procure millions of the same replacement parts separately, the prices of which vary greatly depending on how well the country negotiates, leading to big discrepancies between them.

But a comparison of the three countries' purchasing terms showed that they had all bought thousands of components at the very worst of conditions. Building up a large data base made it possible to identify the best price for millions of spare parts, to mathematically optimize the purchasing model and to enormously reduce the procurement costs by means of a common-part strategy! Transparency rules!

For us, transparency is the fundamental basis that stands at the start of any purchasing project. We help reduce costs not only in calls for tender, but also by establishing strategic purchasing with the right organizational structures within your enterprise. To do so, we connect your procurement instance with adjoining divisions such as product development, production, logistics, warehousing, etc. as a key function in a close-knit collaboration.

By combining expert know-how with individually customized digital solutions, we generate results that last. Our project teams comprise strategic procurement advisors, industry experts and digital supply chain professionals. We realize savings while viewing your purchasing activities within the context of the overall value chain.

A plant engineering company grew constantly over the course of many years through corporate acquisitions in various countries. With each added subsidiary, the purchasing volume increased, but sadly, so did the complexity and costs. Procurement was not coordinated. There was as good as no transparency with regard to the companies, venues, costs or product groups, with the result that procurement costs skyrocketed.

That is why our working-capital projects cover all relevant parts of the supply chain, such as inventory management, demand management, network design, throughput time reductions, process optimizations and much more. We have a combat-tested tool box at our disposal, for instance for analyzing the cash conversion cycle, working-capital benchmarking and our Cash Health Check, which includes an optimization of the claims and liabilities management process, for example.

One important question is that of "OtC" or Order to Cash: This indicator looks at the entire process of monetarizing an order and is an important KPI in not only logistics and the entire supply chain, but also in cash management, i.e. corporate financing and customer satisfaction. Order to Cash measures the time from the customer placing the order (e.g. in the call center) to when the money arrives at the bank. This figure is a large-scale appraisal of the process and customer satisfaction based on a very simple but decisive measurement variable at the end of the process: the customer is happy, and pays the bill!

What other clever ideas for digitally supported cash management are there? One example from industry practice: Tractors simply mustn't break down, least of all during harvest time! And for precisely that reason, agricultural machinery manufacturers keep tens of thousands of different spare parts worth several million euros in stock. The 700 dealerships of a market leader in the agricultural machine industry kept more than half a billion euros in their warehouses – many millions of parts, and yet it still had machines out of commission because required parts were not available. And at the end of the year, it had to make big write-offs for parts it held but no one needed.