Bread & butter in purchasing – supplier management: supply chain transparency leads to countable results – and not just legal compliance

Supply chain transparency has been a huge topic in politics, business and in purchasing departments not only recently. But even apart from the changing legal requirements, it is remarkable how little purchasing departments sometimes know about their suppliers.

In our Bread & Butter- or Daily Business, we are often addressing the challenges of our customers from this perspective as well, of course – and together we are achieving remarkable results.

From supply optimization to Bundling Management

This was the case, for example, in a project in the metal processing industry that was actually focused on optimizing delivery concepts and times. The aim was to negotiate with selected international suppliers of A/X materials on the introduction of e.g. consignment warehouses/vendor managed inventories (VMI) and a corresponding management solution to increase supply security and shorten delivery times.

Non-structured and non-documented vendor portfolios lead to fuzzy market clusters & market penetrations

To the surprise of our customer’s various material group managers, a closer look revealed numerous overlaps with regard to the supply partners in the material groups. In the end, the product and service portfolios for the majority of the suppliers were not recorded or documented in a structured manner. For example, different purchasers talked to the same supplier about different material groups in an uncoordinated manner. Or, conversely, for some proven and competitive suppliers, it was not clear that they could also offer other relevant materials for our customer.

How Supply Chain Transparency leads to significantly improved process and material costs

With regard to the actual project objective, this insight resulted in further project requirements and bundling potential. Firstly, bundling the relevant materials with an appropriate number of supply partners not only increases process efficiency in handling, but secondly, not least, it also increases competition and thus has a positive effect on material cost.

Our project to optimize supply management therefore expanded at very short notice into a material group and supplier management project. The central task was to obtain the most important information as quickly as possible in order to be able to fully evaluate the suppliers. To this end, the existing and rarely used supplier self-disclosure was revised or – better – rebuilt together with the customer. This involved systematically and in detail addressing topics such as

• Product portfolio, production focus, work processes,
• Current machine equipment
• Existing certifications (quality, environment, safety)
• Obligatory principles of conduct (economic, supply chain, social, environmental)
• Liability insurance

Filling in this information was the necessary and goal-oriented preparation for the supply partners and ultimately the ticket for the negotiations. Fortunately, the response rate of the questionnaires was also very high at 98% due to the good competitive situation.

Information transparency generated in the short term – Optimized market penetration and increased competition

The findings from these questionnaires made it possible to conduct targeted and bundled inquiries for specific market clusters and material groups that had previously been considered separately, and thus to systematically increase competition among the supply partners.

With the conclusion of the negotiation rounds after a project duration of a good four months, the following results were achieved:

1. Optimization of Supply Management (reliability and delivery time) by establishing VMI incl. corresponding management software.
2. Consolidation of the Supplier Base from 25 to 17 supply partners (32%) in the project scope segment
3. Optimization of the cost level of materials in the project scope by approx. 8.6% (saving: € 1.1 million with € 12.8 million project spend)
4. Significantly increased transparency in the supply chain for selected A-/X-materials.

Increased supply reliability & process efficiency with reduced price level

As Adconia GmbH, we advise our customers with the experience of more than 250 projects from more than 17 years – in matters relating to Procurementg, Supply Chain and the digitalization of processes. Our goal is always to increase the profit contribution of Procurement through cost reduction, process automation or the qualification of our customers‘ purchasing teams.

With a correspondingly broad range of experience, precise knowledge of operations and a high level of competence, our consultants conduct projects on an eye-level. We do this – depending on the requirements – both as a sparring partner for specialists and managers with many years of experience and as a trainer for seasoned purchasing professionals and young professionals.

 

Tim Rohweder

Partner. ADCONIA GmbH