Procurement Transformation

Client Challenge 

Client’s offering integrates design, engineering, production, testing and lifelong services of flexible, customized drive systems that translate power from any source into action. Headquartered in Germany, the client operatesproduction sites in Europe, North America and India. The business has grown organically and by way of selective acquisitions to increase competitiveness and regional coverage.

Following the acquisition, procurement was identified as a major driver of value but had been previously under-leveraged.

• High percentage of costs made up of external expenditure, but a lack of strategic procurement. Procurement seen as a local, transactional ordering function
• Decentralised structure, with separate procurement functions in each production site
• Lack of spend and contract transparency, with little understanding of supplier cost structures
• High impact from raw material cost increases  

H&Z Approach  

Working in close collaboration with both Triton leadership and across functions within RENK, an expert procurement team from H&Z were able to bring deep sector knowledge, analytical insight and proven value creation methodology quickly into play. 

In the initial four-month Procurement Boost phase, the focus of the global cross-functional team was:

• Realization of rapid P&L impact through a structured program of negotiation with more than 100 key suppliers
• Development of the mid-term Value Creation Plan for procurement
• Development of the blueprint for the Future Operating Model for Procurement The “go live” of the new procurement organisation was celebrated with the very first Global Procurement Conference, building the team and aligning the future direction

The “go live” of the new procurement organisation was celebrated with the very first Global Procurement Conference, building the team and aligning the future direction.

Results

In four months:

• Rapid 3% saving realisation, with no compromise of quality, lead times or performance
• Mitigation (and reversal) of supplier cost increases through supplier cost analysis
• Value Creation Plan targeting further double-digit savings over next 3-years
• Target Operating Model for Procurement Excellence 

Working together, the project had a high focus on knowledge sharing and on-the-ground coaching and training to support the development of the procurement team. A key lever in driving double-digit savings was supplier cost transparency. Raw material cost increases were an issue in every negotiation. The introduction of MLPP, cost benchmarking and should-cost modelling techniques enabled existing suppliers to be challenged, mitigating price increase pressure through fact-based analysis.