The amount of operational tasks in purchasing does not allow for renegotiations or strategic optimizations? Suppliers with a discount rate of 0 percent are accumulating and the overview of payment terms has been lost for a long time? This scenario is a reality in many purchasing departments and ensures that valuable savings potential remains untapped. The reason for this is often inadequate or even missing condition management. Thereby, companies could increase their own liquidity and improve their cash flow by increasing the discount rate and extending the payment terms. In practice, however, buyers rarely have time to apply appropriate condition management measures.
Saving capacities through external condition management
Support for this is provided by the specialist department for condition management at Kloepfel Consulting GmbH, which represents the first interface between purchasing consultants on site, the customer himself and his suppliers. With many years of experience in optimizing payment terms, it functions as a strong partner for purchasing. In its function as a service provider within Kloepfel Consulting it offers a comprehensive service for the customers of the purchasing consultancy. The primary goal of condition management is the sustainable optimization of all prices and payment conditions.
Three different measures are used, starting with the optimization of payment terms. The aim here is to create financial advantages for the customer by standardizing the terms of payment. At the same time, the customer also benefits from considerable process optimization. If negotiations are successful, the existing payment terms can be improved with a success rate of 0.3 to 0.7 percent, depending on the cash discount rate.
In addition, condition management can achieve advantages for purchasing through direct price negotiations in the form of ad-hoc telephone negotiations. In particular, B and C suppliers, who account for a comparatively small proportion of the purchasing volume, are the target of direct negotiations. In this way, savings can often be realized that were previously unused.
The daily purchase orders and purchase requisitions in Purchasing are also part of the negotiation objects in condition management. Once the customer has released the purchase requisitions and requested quotations, condition management is integrated into the process. The suppliers are contacted on the same day and the offers are renegotiated. The success rate with regard to the savings achieved is on average between 3% and 5%.
Condition optimization procedure
In a preparatory phase, the potential of the existing payment terms is first analyzed in order to define the negotiation targets. Using an extensive discount database, a benchmark of payment terms is created, which allows the derivation of the objectives. A guideline developed especially for condition management enables the implementation of the negotiation strategy. As part of Kloepfel Consulting, condition management is a capacitive and supporting measure for the local project teams. The high number of negotiations already conducted by the condition management team ensures a steep experience curve, which has a significant impact on the success of the negotiations. The process optimization achieved by the condition management releases resources and capacities, which in turn can be used profitably and usefully in other processes. At the same time, the increase in liquidity resulting from extended payment terms generates financial added value, which also leads to a positive development of the cash flow, which benefits competitiveness.
In general, companies benefit not only from the financial added value. The existing business relationships with the suppliers are also strengthened and it is ensured that the agreements made are met and even better conditions are achieved.