Magazine 02 : CAPEX - How to reach your goal!

Companies often miss budget and specification deadlines when procuring capital goods. Integrating procurement in planning and organization early on can make it possible to meet these goals, and also, to beat them.

Today, we sometimes get the impression that a new Bermuda Triangle has emerged in business. Generally, though, it is not ships or airplanes that disappear, but cash, capital and other assets. Notable examples are the Berlin-Brandenburg Airport, Stuttgart 21, and the Elbe Philharmonic Hall. It is not only major public projects that are affected by the phenomenon of such a remarkable waste of money, time and again, private business has problems with investment projects. This is because, in many companies, particularly mid-sized companies, CAPEX, as opposed to OPEX, is not professionally managed, to the considerable detriment of anticipated profit and operating results.

CAPEX Expenditure Rising Steadily

CAPEX expenditure is many times greater than expected, and is continuing to grow. CAPEX requirements of the 11,000 largest companies in the world rose from USD 1 trillion to 3 trillion from 2002 to 2015. That represents an average increase of 8.7 percent per annum.

Capital-intensive industries, however, are way ahead of these CAPEX investment figures. Electricity suppliers come top of the CAPEX board, with an average of 13 percent of their turnover, closely followed by oil and gas companies, metal production, and mechanical engineering, with an average of 6.3 percent. But CAPEX also represents a significant share in all other industries, and can be essential for success.

The CAPEX Phenomenon

It is striking that OPEX procurement has achieved a high degree of maturity in recent years and is often structured in a very professional way. Expenditure on CAPEX requirements, though, is often only managed superficially in terms of procurement. This may result in companies negotiating intensively for OPEX requirements, while sometimes giving away millions on CAPEX. You could even dare say that the price of every paper clip is haggled over, while the responsibilities of procurement e.g. when determining complex requirements such as buildings, machinery, or IT systems, rarely extend to using total cost of ownership (TCO).

The 5 most important Procurement Levers?

Leading European procurement experts from different industries discussed the topic of CAPEX at the Boston Consulting Group’s annual Procurement Round Table. In a workshop, the most important points for optimizing the procurement of investment requirements were determined based on the experience of these experts

You can download the results and the complete article with our magazine free of charge below.

Further topics in this issue:

• Contractor Management
  Successfully Managing Service Providers
• Risk Management
  Political turbulences threaten global supply chains
• Company News
  INVERTO moves closer to customers in European markets

Dear Readers,

I would like to welcome you to our newly designed magazine. In the future, we would like to offer you even more and more descriptive information on purchasing and supply chain management: Expert knowledge, success stories and innovative solutions from the industries in which you operate.

Our topics

The topic Capital Expenditures – CAPEX often lacks an overview. What is the reason and what can you do about it? In our cover story we take a closer look.
Risks arise with large investments, but also in ongoing business. How companies deal with risks is surveyed annually in our risk management study – we have summarized for you the concerns that decision-makers are currently worried about.
If service providers do not do what the client expects them to do, this may be due to homemade problems, we found out in an expert survey. You can find out what you need to find and optimally manage suitable service partners in our article on contractor management.
Not only the customer magazine continues to develop – we are also expanding our consulting services. With the expansion of our management team and new locations, we are moving closer to our customers in Scandinavia and Great Britain. Read more in our company news.

Have fun reading!

Your Thibault Pucken
Managing Director INVERTO GmbH

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