Purchasing consultancy helps optimizing purchasing processes and conditions. Marc Kloepfel talked with us on his work and the future of purchasing.
How does your purchasing consulting work?
Marc Kloepfel, Head of Kloepfel Consulting: We primarily do two things: First, we optimize terms and conditions. As a temporary purchaser for six, eight, twelve months in the company, we work with purchasing to check all suppliers and product groups. Why can't purchasing do this on its own? The most important reason is time. Each purchaser has daily responsibilities that mostly keep them so busy that they don't have any time left to spend on strategic questions. Our presence is justified in that we bring qualified employees and a wealth of experience to the table. Second, we optimize structure in parallel: purchasing processes, organization, and IT tools in purchasing, employee restructuring and qualification in order to make purchasing stronger as a whole.
What do the purchasers think about this?
In the beginning, there are often uncertainties– self-confident purchasers might even be thinking "I have the best prices anyway, so what can they tell me?" However, good teamwork quickly evolves - thanks also to the fact that our employees have purchasing backgrounds, are pragmatists, and speak the same language.
Position of purchasing is changing
The term "partner management" is often used today. How do you feel about the term "purchasing"?
It is no longer sufficient to negotiate just terms and conditions with suppliers. Companies generally need to look a lot deeper - also because companies have realized that purchasing has changed. In the automotive industry, expertise has increasingly shifted toward the suppliers.
Hasn't the strategic position of purchasing significantly changed?
This question must be considered by industry. Retail and the automotive supply industry are pioneers. Whereas, for example, with special systems engineering, purchasing still often just operates as an order office. But the depth of added value has continued to shrink; instead of granulate, wood, and steel, companies are now buying further processed and highly technical products. Suppliers have become producers, and purchasers are now relationship managers who build relationships and incorporate market trends in companies. They can learn a lot about their competition from suppliers and purchasing can also manage the inventory situation.
Purchasers are trained and so are the sellers. Who has the upper hand?
Is purchasing actually trained properly? We are talking about small and medium-sized enterprises (SMEs). It is different in corporate groups. We very often perform surveys that indicate sales is trained ten times more often than purchasing. Often times there isn't even any budget for it, even though purchasing plays an extremely important role in earnings. We believe the focus on qualification in purchasing needs to be significantly increased.
Digitalization, networking, globalization– to what extent have these major trends also changed the purchasing environment in SMEs, those that you predominantly advise?
Automation and networking of suppliers with companies are becoming increasingly more important. It starts with tools and programs that are used in purchasing. They hold an incredible amount of potential. It will be a huge topic in the next few years. We are already working with business intelligence programs that can predict certain trends such as raw material prices.
And what role does globalization play?
In light of the ever expanding automation, it often doesn't make sense anymore because the logistics costs eat up the labor cost savings. On the other hand, labor-intensive parts are still purchased locally, simply because purchasing is risk averse, doesn't speak English, or doesn't want to travel to the producer countries. Greater potential than globalization lies in jointly and comprehensively optimizing processes, products, and procedures with existing suppliers. By doing this, I can help companies achieve competent, respective process improvements so they can manufacture the product or products more cost effectively and sell them at more reasonable prices.
All commodities can be outsourced
Do you see purchasing groups as a way to optimize a company's own purchasing? Or do they hold risks?
I think it is an ideal concept, but almost never applied. Physical purchasers always think they have the best price. That is why they do not approach another company for joint purchasing - even though there are many possibilities. It starts in an industrial park with six or eight companies who all need power, cleaning staff, office supplies, etc. Switzerland is definitely leading the way in this regard.
Can purchasing be outsourced?
We think that will be an important topic in the future. Think of the shared service center. With purchasing, companies have to distinguish between core competency and commodity. Everything that falls under the latter (i.e., standard orders, raw materials, indirect costs) could all be outsourced to an external provider. This is already common practice incorporate groups, but yet hardly at all in SMEs.
Where do you see typical purchasing errors?
In the food industry, the focus is often on raw material costs, even though they only have minimal impact. In contrast, companies underestimate potential savings associated with packaging, power, logistics, etc. -also because the purchaser lacks time. Mechanical engineering companies often pay too little attention to synergy effects with new developments. It is therefore important for purchasing to be involved right from the very beginning. Risk management is another topic. What would happen if certain suppliers no longer existed tomorrow? Could it potentially shut down production lines? The number of suppliers that a company is totally dependent on is usually in the double digits. There have indeed been cases in which companies have gone under because of an insolvent supplier.
Interview conducted by Jens Karolyi and Heike Grunwald. It was originally published in "moving", February 2016.