Raise investment treasures with product group profiles
Even today, purchasing in many medium-sized companies is not strategic enough, so that return on investment treasures are hidden. A proven approach to uncover these is to develop procurement strategies for relevant product groups and then implement them with concrete measures. A product group is characterized by the fact that the requirements can be procured from a portfolio of similarly oriented suppliers. The essence of this commodity group strategy should be presentable on a One Pager – a commodity group profile that serves as a treasure map. With around 20 to 30 WG profiles, medium-sized companies can clearly prepare their procurement and supplier portfolio and open up new strategic perspectives in the purchasing jungle.
More leverage for purchasers
This approach has several objectives: An efficient use of resources in purchasing, the strengthening of negotiating power, bundling effects and a uniform strategic orientation. This is because it increases the leverage effect when similar requirements for goods and services are combined in one procurement field – across business units, plants and subsidiaries. A lead buyer or commodity manager then takes the lead for one or more product groups throughout the organization. This allows him to master the procurement topic from an overall entrepreneurial perspective.
The four milestones of the WG strategy
First a WG strategy must be derived – with a little experience this can be done very quickly. The four essential milestones are:
Starting point is the visibility of spend by organizational unit, sub-category and supplier. Based on this, the current supplier portfolio is critically reviewed. Identified cost drivers can provide indications for the geographical optimization of the supplier portfolio, for example by shifting to Eastern Europe. A good understanding of the future requirements of the consumers is indispensable. Overall, the procurement strategy for the product group can be reoriented and coordinated with the stakeholders in the cross-functional team.
Derive WG strategy: The right tools
Different tools and methods are used to derive the WG strategy. According to Porter, an attempt is made to understand the current competitive forces in the procurement market. Portfolio analyses according to Kraljic suggest typical standard strategies. In addition, it is possible to derive typical recommendations for action from one’s own strengths and weaknesses as well as the opportunities and risks on the procurement market.
The WG strategy defines the future sourcing strategy. The supplier portfolio to be aimed for is outlined. Optimized ordering and procurement processes are also to be defined. Finally, an attempt is made to influence the wishes of the users in order to facilitate the commercial objective.
In a third step, the potential is estimated and the levers and measures for implementation are defined. The purchasing lever matrix of Kloepfel Consulting suggests the best-fit approach.
This belongs on the WG profile
Ideally, the result of the resulting WG strategy should now be summarized in the WG profile in order to convince internal stakeholders with comprehensible information.
The WG profile should contain the following elements:
- Responsible lead buyer and the cross-functional team
- Expenditure by sub-range or sub-categories of products
- Supplier portfolio and supplier strategy
- Results of the supplier evaluation and classification
- Procurement strategy
- Demand planning, major projects and new projects
- Goals, potentials, levers and measures for implementation
- Periodic status update
Implementation is then more time-consuming than strategy development: It takes at least three to four months, sometimes much longer – depending on the complexity of the procurement fields.
Strategic alignment through overview
The implementation of the WG strategy creates the preconditions for optimized procurement by operational buyers and consumers, as preferred suppliers with attractive framework conditions are available. Wherever possible, individual prices, quantity contracts, replenishment times and coordinated procurement logistics were negotiated in addition to agreements – and are stored in the system for immediate use. In this way, requirements and sources of supply are cleverly combined throughout the company and purchasing positions itself more strategically.
You and your employees want to go on a treasure hunt and get to know the methodical tools for convincing product group profiles? Contact Kloepfel Academy now!
Author: Dr. Stephan Hofstetter, Partner Kloepfel Consulting
Press contact
Kloepfel Consulting GmbH
Gerrit M. Schneider
Press officer
T: +49 211 / 882 594 17
Mail: gm.schneider@kloepfel-group.com