Professionalisation of procurement in a start-up
Our client runs a modern online shop for stylish erotic products. The company was founded at the end of 2012 and has since developed into the market leader and a lifestyle company for love life and relationships for a fun-loving and open-minded target group. The product portfolio includes love toys, lingerie, body cosmetics and soft bondage accessories.
Since this year, the products can also be found in shops, including branches of the drugstore chain dm.
Initial situation/challenges
In order to be prepared for further growth and future business with retailers after the start-up phase, the retailer commissioned INVERTO to professionalise the procurement function. The focus was on establishing transparent and efficient procurement processes, as well as improving current procurement conditions for brand and private label suppliers and for indirect requirements.
A particular challenge was the high quality requirements with regard to product quality and skin compatibility. INVERTO was able to meet these demands with a qualified expansion of the existing supplier pool. In order to be able to meet the increasing demand for own brands in the future, greater importance was also attached to procurement from Southeast Asia.
Objective
The following project objectives were defined:
- The following project objectives were defined:
- Increasing the gross profit for selected brand suppliers through strategic negotiations
- Optimisation of conditions and procurement of own-brand products
- Improvement of sourcing prices for packaging and packing of own-designed and curated boxes & sets
- Training the procurement team on sourcing and negotiations
Approach
In order to increase the gross profit for selected brand suppliers, the first step was to professionalise the brand negotiation process. In doing so, KPIs (including contribution margin, advertising allowances), competition and the company’s role in the market were specifically used to increase effectiveness. In preparation for the negotiations, a data analysis was carried out to show the suppliers how far they could participate in the company’s success. Many brand suppliers were not aware of the company’s role as a marketing “multiplier”. Accordingly, the brand had to be anchored in the mindset of the suppliers as a new lucrative sales channel that makes it possible to market high-quality products.
The establishment and expansion of a reliable partner network was prioritised as the basis for a steady expansion of the own-brand range. With the support of the INVERTO office in Shanghai, an intensive supplier research and evaluation took place. Suppliers were pre-qualified by querying qualitative parameters (RFI).
With the supplier short list, the tendering process took place. Competitive new suppliers identified by INVERTO also finally underwent pre-audits, which were conducted by the Shanghai office. Negotiations on terms and conditions were held with existing suppliers and potential new suppliers.
INVERTO’s recommendation for the new suppliers included both qualitative (quality standards, production capacity, lead time, etc.) and quantitative parameters.
The sub-project, optimisation of the specially designed and curated boxes and sets, focused on potential savings in packaging and packing. Together with the internal project managers, INVERTO first specified the requirements. This was followed by supplier research, pre-qualification, tendering and negotiation by INVERTO.
Results
- Improved conditions and significant savings of >10% across all projects
- Introduction of systematic and transparent procurement processes (detailed tendering processes, South East Asia procurement for own brands, professional negotiation practices, etc.)
- Expansion of the supplier portfolio in the private label sector and thus strengthening of negotiating power, long-term security of product quality, reduced dependence on a few suppliers
- Introduction of new suppliers for the production and packaging of the specially designed and curated boxes & sets, who distinguished themselves as competent partners with regard to the design development process and cost optimisation
- Sustainable assurance of realised and future negotiation results through on-the-job training and/or joint supplier negotiations
Meet our retail expert
Our insights from retail
