Bundling Across Sites
The principle of structuring companies by profit centers with local business responsibility is frequently applied in both North America and Europe. As these companies are often highly successful, there is evi¬dently nothing wrong with the principle as such.
Consulting practice shows, however, that the autonomy granted to the individual sites is often excessive, with the result that considerable savings potential remains unused. Also, the responsibility of profit centers for P & L is often taken to mean that they need to handle all procurement, given that purchased materials account for a high proportion of turnover (often more than 50 percent). This way of thinking leads to a proliferation of sub-critical procurement organizations, all working in parallel in the market. In many cases, the sites buy similar products, sometimes even from the same suppliers.
In order to identify potential savings, information on precisely what demand which site has in terms of quantity and quality needs to be gathered from the individual site purchasers. Next, the necessary data should be compiled in order to draw up a joint invitation to tender. The invitation is issued to all those existing and new suppliers theoretically able to supply several sites. Negotiations are then conducted for all the participating sites at the same time. It is essential to decide in advance which sites should lead the negotiations and which ones should only participate in a supporting capacity. Conducting the negotiations need not be entrusted to the site with the highest demand, but rather to whichever one appears most capable. Thus, the chief negotiator should be a local purchaser who is especially well versed in the relevant technology and has expertise in the supplier market.
In many cases, a project for identifying savings potential across sites will form the core of a future lead-buyer structure. In this case, lead negotiators who previously acted in only an informal capacity will grow into an official organizational role and assume procurement responsibility across sites. This responsibility may be restricted to simple market research, but may also include concluding master agreements or even taking overall charge of ordering.