Interim CPO Optimizes Conditions and Liquidity Needs in Procurement

Interim CPO professionalizes the procurement department of a struggling mechanical engineering company, optimizes purchasing conditions and creates liquidity.

By Dr. Thorsten Dörr

The Client

A German medium-sized company in the special machinery sector had gone through turbulent times. Change of ownership, restructuring and departures of key personnel had led to unclear, unstable processes and structures.

In this circumstance, an experienced interim manager had been mandated with two goals:

First, to establish a professional and effective purchasing function through further development of structures and processes as well as professional and personal coaching of employees,
Secondly, to introduce a proactive management supplier in order to achieve the optimum results for the company in terms of prices, delivery conditions and conformity (quality, deadline).

The Challenge

The procurement function was burdened by the company's history: The insolvency of a predecessor company led to ambivalent relationships with numerous suppliers. Here, it was necessary to be a reliable business partner and to rebuild trust.

The purchasing department had a basic product group management system in place, but responsibilities had not been conclusively clarified and were not tailored to employee competencies. In addition, responsibilities were not fully anchored in the master data of the ERP system.

The heterogeneous purchasing workforce was also challenging: long-serving employees with a group background on the one hand, and new recruits on the other. The formation of valid working relationships was made more difficult by home office assignments.

The Solution

Through intensive dialogs with employees on numerous factual issues, the interim manager laid the necessary foundation for trustful and constructive cooperation. This also contributed to the recognition of his role as a professional and skilled moderator. In areas of conflict, he defined responsibilities and standards that could be accepted by all.

Internalizing these standards and aligning daily actions was rather difficult for some employees at the beginning, but moderated group meetings revealed the backlogs and led overall to a sustainable improvement in group results as well as to a real coalescence of the team.

Negotiations were always prepared jointly, sometimes with the involvement of design, quality and management. This made it possible to define objectives and role assignments for supplier discussions in advance.

The Results

Intensive negotiations resulted in improvements in terms and conditions for new business:

Price discounts
improved delivery terms, and/or
shortening of delivery times.

Of particular importance, however, were changes in payment terms: Instead of liquidity-intensive advance payment arrangements, payments on target came into effect.

Changes in the allocation of product groups and the resulting clear regulation of responsibilities and deputies led to transparency, both internally and externally. In particular, communication with the respective business partners was essential in order to rebuild relationships and trust.

Product group management was an important building block for employee development, because it allowed training content to be defined to enable employees with less professional experience to build up technical skills in a targeted manner. This enables continuous and sustainable improvements in the purchasing function.

About the Author

Dr. Thorsten Dörr

Managing Partner, Interim Management, Germany

Dr. Thorsten Doerr specializes in the tailored placement of interim executives at board and senior management level. With 20 years of professional experience in strategy consulting and as managing director of family-owned businesses, he provides organizations with perfectly matched interim executives for mission-critical situations. His clients include international upper mid-market companies across pivotal industries such as automotive suppliers, mechanical engineering, electrical engineering, defense, chemicals, and food.