Uncovering savings potential in purchasing holistically
Interview with Lana Al-Haidary, Senior Consultant at Kloepfel Consulting, Lina Terhardt, Consultant at Kloepfel Consulting, and Sandra Blanco, Consultant at Kloepfel Consulting.
When should a potential analysis of indirect and direct costs be carried out? And what are typical indications that money is being spent unnecessarily in indirect or direct purchasing?
There are several signs that optimization is required in the purchasing area. The main indicators are high purchasing costs in relation to turnover. If purchasing costs make up a significant proportion of turnover, this indicates that there is potential for improvement.
The inadequate performance of suppliers is also a problem. Late deliveries, quality defects or poor communication with suppliers can impair efficiency and require optimization.
Another aspect is excessive stock levels. Excessive stock levels in the warehouse can indicate inefficient procurement processes, inaccurate forecasts or inefficient warehousing strategies.
A limited supplier base also serves as an indicator. A small number of suppliers or excessive dependence on individual suppliers pose risks such as price fluctuations, supply shortages, or limited negotiation power.
Finally, high costs for procurement activities are an important factor. If the costs of handling procurement activities such as order processing and invoice processing are disproportionately high, there may be a need for optimization.
How is data collected for the analysis?
Once the potential analysis (PA) service contract and the non-disclosure agreement (NDA) have been signed, we provide our customers with our data query template. In this template, we request the purchasing data from our customers in order to initiate a potential analysis. Our template only serves as an aid; our customers also have the option of exporting data from their ERP system and making it available to us. This exchange usually takes place by e-mail. Alternatively, a transfer folder is available via Teams, which we can use for data exchange.
What specific tools or technologies does Kloepfel Consulting use to identify these savings potentials?
We have a variety of tools that are used to analyze customer data as part of a potential analysis. Among other things, we use our Power BI solution and other analysis tools. Although Excel is indeed one of our tools, we have also built up an extensive database over time, which we use as part of the potential analysis. We also make use of the expertise of our lead consultants in the various areas, who can provide us with valuable assessments based on their many years of experience in different sectors and topics.
Furthermore, we plan to automate future processes using artificial intelligence in order to enable more efficient use for the benefit of our customers.
What data helps to draw benchmarks?
Various data can help to determine the performance of purchasing. These are, for example:
- Price data: Information on prices for specific products or services, both internal and external, can help assess the competitiveness and effectiveness of procurement.
- Supplier performance: data on supplier performance, such as delivery times, quality of products or services supplied, and delivery reliability, allows comparison with best practice and helps to identify areas for improvement.
- Cost data: Information on the cost structures for specific procurement activities, including direct and indirect costs, helps to identify and quantify efficiency gains.
- Volume data: Data on procurement volumes for specific products or services enables comparison with other companies or industries and helps to identify economies of scale.
- Contract data: Information on contracts with suppliers, including contract terms, prices, terms and conditions, can help evaluate a company’s negotiating position and make comparisons with other companies.
- Market data: Information about the market and the competitive situation, such as market prices, trends and developments, makes it possible to understand one’s own position in comparison to the market environment and to derive strategies for improvement.
How does communication and cooperation with the companies take place during the analysis phase?
Once the PA contract and the NDA have been successfully agreed, either the partner or the project manager, especially the PA project manager, schedules a joint meeting with the client. This is usually held as part of a video conference via Teams. We also discuss the planned approach and what the customer can expect soon. We then usually communicate by e-mail and telephone.
How are the results of the potential analysis presented? And how detailed or reliable are they?
The results of the potential analysis are presented in a presentation, either in person at the customer’s premises or virtually via Teams. Our analyses are extremely detailed and reliable. As a rule, we even exceed the predicted savings in the subsequent projects, as we take a conservative approach to our estimates of potential. These figures are largely based on proven experience gained in other projects.
We have various tools with which we can determine the repetitive nature of items, for example, focusing on volumes that can be processed. The savings can result from negotiations in the short term or be estimated in the long term, which takes more time but results in greater savings. Negotiation and strategy play an important role here.
What are typical reactions on the part of the customer when the results are presented to you?
Our customers always react positively and with surprise to the results that are presented as part of a potential analysis. Some are amazed at the extent of their purchasing volume, which often only becomes clear when we explain and visualize the data. They are surprised by the depth of our analyses and how we identify potential savings in the various areas. One example of this is our cost engineering, where we evaluate and calculate individual components of an article down to the smallest detail. Customers are often surprised to find that the parts in an article cost much less than they had originally assumed. This realization that they may be buying too expensively usually leads to them being open to further projects with us.
What steps does Kloepfel Consulting recommend companies take after the analysis to implement the results?
After presenting the results, we suggest suitable measures to optimize procurement costs. As we have already carried out comprehensive analyses, we have a solid working basis, which reduces the effort for the client to obtain further data.
Ultimately, we act as temporary employees for the customer and thus offer them relief. Our motto in this regard is: We are your temporary colleagues and coaches!
How can the long-term impact of the changes implemented be secured?
Our goal at the start of the project is not only to quickly generate potential savings or to optimize purchasing in the short term, but also to secure these successes in the long term. To this end, we implement various measures, such as the introduction of framework agreements, to ensure long-term savings. If the customer has many C-suppliers or the total number of suppliers is high, we recommend bundling suppliers, for example, in order to reduce the complexity and effort of supplier coordination.
We also offer various solutions, such as Kanban or the introduction of an e-procurement system, to automate the procurement of C-parts, for example, as this has little impact on the customer’s value chain. By reducing the number of suppliers and introducing an e-procurement system, buyers can save time and concentrate on strategically important tasks.
Sometimes customers show interest in our tools and ask if they can adopt them. One specific example of this is an ABC analysis tool that a customer particularly liked. They asked to integrate it into their company as it met their requirements. The team was of course happy to make the tool available to the customer.
Potential analyses also help customers to get to know us and our work better. What hard and soft skills are important to customers when selecting purchasing consultants?
The decisive criterion is that the buyer is not just based on theoretical concepts. An example of this would be someone who presents theoretical approaches from textbooks but fails when it comes to implementation. Our expertise lies in the fact that our consultants actually come from the industries they work with. Our colleagues come from the automotive industry, mechanical engineering, retail, the pharmaceutical sector and the consumer goods industry, among others. Furthermore, we do not see ourselves as external consultants, but as temporary colleagues and coaches. This creates a basis of trust and is appreciated by our clients.
Of course, the figures must be right. Hard skills such as industry experience and analytical skills are important, but so are soft skills such as empathy and pragmatism.
Authors:
Editorial staff: Chantale Klose
Contact:
Kloepfel Group
Damir Berberovic
Tel.: 0211 941 984 33 | Mail: rendite@kloepfel-consulting.com