Purchasing as a profit driver
The latest edition of the Purchasing Manager’s Index once again shows further price increases, especially in terms of raw materials. Despite or indeed because of the natural and nuclear disaster, prices have risen.
Yet all other indices also point in the direction of a long-term upswing. Only in Greece, the index stands below 50 points, a mark that signals a negative growth. However the index rose even in Greece.
As a consequence of increasing price pressure, companies see purchasing as a profit driver more and more; in addition, they pay heed to the non-core costs and seek strategies and methods of reducing them on a long-term basis.
The tendency to reduce the expenditures for marketing, energy, packaging, cleaning, travel expenses, fleet management can be recognized in virtually all industries. Management as well as financial officiers and purchasing managers are pushing more and more toward procuring noncore expenses professionally. In the process, there are various methods for how companies try to achieve these goals.
Above a certain size, companies often try to realise saving potentials on their own. The purchasing department is integrated in the procurement process at an early stage. The objective is not merely to realise a couple of percentage points through follow-up negotiations by the purchasers but to tap the potential savings in an integrated way by involving the purchasing department as early as possible.
Moreover, the purchasing department takes up the role of internal training center. The departments are to be trained by the purchasing department in how to achieve the saving targets with the right tools. Especially in areas where there are long-standing and oftentimes personal relations, e.g. in marketing, the departments have to learn that these services can be purchased in the same way as screws, business trips and packaging.
In order to get the departments on board, it is indispensible to explain and communicate the benefits of an objective purchasing. If such measures are not communicated properly and in great detail, companies run the risk that employees will not back the new course and saving targets will be missed or that programs will not be kept up after an initial short-term success.
Saving targets can also be realised on a long-term basis, however, by drawing on external support. Thus one’s own sta can concentrate on the strategic areas of procurement. When utilizing external experts, there are several things to pay attention to. External know-how has to be mandated from the very top. If the management gives the impression that it does not completely support the projects, it is di cult to achieve the targets that have been set.
The employees in question are thus handed an excuse to block changes or not support them to the extent desired. In addition, cost reduction programs should under no circumstances be carried out at the expense of quality. And before the programs are launched the resources on hand and the steps required have to be scheduled and
planned. An analysis of the previous cost structure, the application of purchasing tools, commodity group-specific know-how as well as an excellent teamwork are essential here. Another thing that is indispensible in the case of external
help: The corporate cultures of the partners have to harmonize.
Regardless of what method a company chooses it has to check continually whether the savings are being realized. Many companies achieve a few short-term examples of success yet only a few succeed in realizing the saving targets on a long-term basis.
The question whether a context exists between success in saving and openness to external know-how is being examined by the EBS Business School in Wiesbaden at present. We will be publishing the results in the next issue of the Cost Savings Today. So watch this space.
Yet all other indices also point in the direction of a long-term upswing. Only in Greece, the index stands below 50 points, a mark that signals a negative growth. However the index rose even in Greece.
As a consequence of increasing price pressure, companies see purchasing as a profit driver more and more; in addition, they pay heed to the non-core costs and seek strategies and methods of reducing them on a long-term basis.
The tendency to reduce the expenditures for marketing, energy, packaging, cleaning, travel expenses, fleet management can be recognized in virtually all industries. Management as well as financial officiers and purchasing managers are pushing more and more toward procuring noncore expenses professionally. In the process, there are various methods for how companies try to achieve these goals.
Above a certain size, companies often try to realise saving potentials on their own. The purchasing department is integrated in the procurement process at an early stage. The objective is not merely to realise a couple of percentage points through follow-up negotiations by the purchasers but to tap the potential savings in an integrated way by involving the purchasing department as early as possible.
Moreover, the purchasing department takes up the role of internal training center. The departments are to be trained by the purchasing department in how to achieve the saving targets with the right tools. Especially in areas where there are long-standing and oftentimes personal relations, e.g. in marketing, the departments have to learn that these services can be purchased in the same way as screws, business trips and packaging.
In order to get the departments on board, it is indispensible to explain and communicate the benefits of an objective purchasing. If such measures are not communicated properly and in great detail, companies run the risk that employees will not back the new course and saving targets will be missed or that programs will not be kept up after an initial short-term success.
Saving targets can also be realised on a long-term basis, however, by drawing on external support. Thus one’s own sta can concentrate on the strategic areas of procurement. When utilizing external experts, there are several things to pay attention to. External know-how has to be mandated from the very top. If the management gives the impression that it does not completely support the projects, it is di cult to achieve the targets that have been set.
The employees in question are thus handed an excuse to block changes or not support them to the extent desired. In addition, cost reduction programs should under no circumstances be carried out at the expense of quality. And before the programs are launched the resources on hand and the steps required have to be scheduled and
planned. An analysis of the previous cost structure, the application of purchasing tools, commodity group-specific know-how as well as an excellent teamwork are essential here. Another thing that is indispensible in the case of external
help: The corporate cultures of the partners have to harmonize.
Regardless of what method a company chooses it has to check continually whether the savings are being realized. Many companies achieve a few short-term examples of success yet only a few succeed in realizing the saving targets on a long-term basis.
The question whether a context exists between success in saving and openness to external know-how is being examined by the EBS Business School in Wiesbaden at present. We will be publishing the results in the next issue of the Cost Savings Today. So watch this space.
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