Optimization of Indirect Spend in a leading Medtech Company
Increased efficiency through company-wide bundling
Our client is a global corporation that manufactures medical technology products as well as diagnostic and the-rapeutic solutions. The company is very customer- and thus sales-centric; procurement played a subor-dinate role at the start of the project.
Objective: Cost optimization in Indirect Spend
Due to the global pandemic, the company was exposed to strong cost increases. At the same time, the sales team reflected that costs could not easily be passed on to the customers. Consequently, the focus shifted to cost awareness and thus to the efficiency of procurement. The joint project therefore focused on stabilizing the cost increases in indirect procurement at a low level.
Approach: Bundling and cross-functional teams
The biggest challenge in the company’s indirect procurement was that there were two independent procurement departments for these requirements – one took care of all the requirements needed in the sales process, while the other was responsible for all the requirements of the production processes. Overlaps and the resulting synergy potentials were unused.
With the aim of creating transparency and being able to evaluate potentials, our consultants carried out a comprehensive analysis at the beginning of the project. In this way, we identified considerable synergy potentials and also a non-negligible share of maverick buying in the other departments.
In the next step, it was elementary to get all parties involved around one table. We not only brought together the previously separate procurement departments via joint processes, but also involved other cross-functional departments such as IT and HR. Together, we updated the specifications for the most important requirements in Indirect Spend, identified the best suppliers and conducted negotiations.
In the supply chain area, we reorganized the processes by bundling all European suppliers and using an advanced analytics tracking tool to decisively optimize the costs for CEP requirements. In IT procurement, the main focus was on the switch to cloud technology. Here, we supported the development of an appropriate procurement strategy and conducted the tenders and negotiations for service desk services and hardware. In the area of laptop sourcing, for example, we were able to significantly optimize the sourcing chain by adapting specifications in line with requirements and conducting professional negotiations with manufacturers, leasing providers and asset managers.
The facility management area was highly individualized for the European locations. By creating a transparency matrix of all service suppliers and their services, inefficiencies and bundling potentials were made visible and could be optimized on this basis. The procurement of recruitment services was similarly fragmented, with local HR departments working with very different headhunters and profiles. Together with the local HR departments, we first defined the requirements for headhunters. On this basis and subsequent discussions, we were able to identify a preferred supplier pool for the standard profiles, supplemented by an extended supplier pool for special requests.
- Optimization of indirect procurement
- Significant savings in the double-digit percentage range, in some IT categories over 50 percent
- Establishment of high-performance processes
- Consolidation of previously separate purchasing organizations and activities
- Establishment of cooperation scheme between procurement and technical facility management