Company-wide Synergies in Purchasing Through Change Management

The Client 

The German subsidiary of a North American corporation acted as a strategic management holding for several independently managed companies in the DACH region. When the company was facing a difficult economic situation in the metal processing and recycling sector, the management decided to realize synergies between the companies involved that would have an impact on results.

As sales prices were largely determined by the global raw material markets and all companies had high material cost ratios, the management focused in the first step on measures to optimize purchasing.

The Challenge

The decentralized organizational structures with a high degree of autonomy for the respective companies had grown historically and had been standard practice for decades. There was little willingness in the operating companies to share information and bundle competencies centrally because it was feared that the project would restrict degrees of freedom and cut jobs.

The project was made more difficult by the great heterogeneity of definitions, processes and infrastructure. For example, there was neither a consistent ERP system, nor uniform material groups or purchasing processes.

The German management holding company had a very lean structure and had neither the necessary resources nor the required purchasing know-how to realize the desired synergies in purchasing.

The Solution 

Against this background, an experienced interim manager was hired who, in addition to extensive experience as a strategic and operational buyer, also had strong change management skills.

First of all, he took an inventory, identified strengths and weaknesses, opportunities and risks. Based on this, measures were defined, evaluated, and prioritized according to their impact on results, investment requirements, implementation speed and risks. Particularly important was the comprehensive involvement of the decentralized management and purchasing departments in order to create transparency and acceptance.

After the entire management team had committed to the goals and measures in a moderated, all-day workshop, the prioritized activities were processed and implemented by company employees under the leadership and coordination of the interim manager.

The Results 

The main basis for the success achieved was the creation of transparency through the introduction of uniform definitions of terms, processes and commodity groups as well as a sharing of information on suppliers. In a very short time, this made it possible to bundle order volumes and significantly increase competitive pressure between suppliers. This additional competitive pressure resulted not only in better purchasing prices and payment terms but also in a higher quality of the products supplied.

Purchasing employees received targeted training on their own products and production steps, as well as in negotiation skills. Improved coordination between the company's sales, purchasing and production departments enabled more reliable demand planning, resulting in lower inventory levels and special costs, e.g. for spot purchases and special freight.

The project was implemented within the planned timeframe and gave the company a sustainable competitive advantage over its competitors.