Professionalization of the procurement function after change of ownership
How INVERTO supports the central procurement of COMPO EXPERT in the optimisation of direct and indirect spend
COMPO EXPERT GmbH, a portfolio company of the XIO Group, handles a wide range of specialist fertilisers, with a leading market position in Asia and South America in addition to the traditional European markets. The company provides safe solutions for professionals in tree nurseries, public green spaces, landscaping, golf and floriculture for orchards and vineyards as well as for agriculture and vegetable cultivation. In addition to fertilisers, its product range also includes nutrient salts, micronutrients, lawn seeds and soil conditioners as well as crop protection products and biostimulants.
Initial situation / Challenges
In May 2015, COMPO EXPERT was separated from COMPO Consumer. Prior to this, the two firms acted as a joint operating company on the market, including procurement. As part of a cost-optimisation plan initiated by the new owners of COMPO EXPERT GmbH, the XIO Group, a review was also carried out of the new portfolio company’s procurement procedure. The review highlighted a difference in procurement requirements across the various production sites in Germany, Belgium and Spain partially due to sourcing activities locally and differences in the local markets served. Many procurement activities were controlled not by the head office in Münster, but by the local site itself. Some goods and services, such as temporary work, were managed entirely locally.
In collaboration with central procurement (the procurement director plus three procurement managers) and the local procurement team (one to two assistants per site), the aim was to achieve cost savings in the high single-digit percentage range in various waves of projects. Among other things, an improvement in net working capital was driven by the extension of payment terms and the settlement of discounts with direct rebates.
Wave 1: Focus on savings potential when procuring raw materials
Wave 2: Co-sourcing, mainly in the area of indirect spend
Wave 3: Optimisation of logistics services
Course of action
Project wave 1: Procurement of raw materials for fertilisers (fixed and variable remuneration was agreed with INVERTO in advance according to the raw material)
As a first step, the raw materials with the greatest savings potential were identified (nitrogen (N), phosphorus (P), potassium (K) and additives). This was followed by drawing up specifications for the most promising requirements. Following this, INVERTO, together with its office in Shanghai, qualified suppliers across the globe for the relevant raw materials and took samples as part of the tender process. During the final renegotiations, future raw material suppliers were ultimately identified and more favourable terms agreed.
Project wave 2: Co-sourcing in indirect spend
In the second part of the implementation, INVERTO was tasked with identifying and achieving savings potential in IT, building management, product portfolios and transport equipment. As part of a traditional co-sourcing process, a set of criteria was created for each category. These criteria were used as the basis for the subsequent supplier searches and tenders. All offers were compared and evaluated in the final step. In IT, renegotiations also took place with providers of existing contracts.
Project wave 3: The aim here was to optimise logistics – despite a generally difficult market situation – by qualifying potential service providers and create cost transparency through a broad market demand, for example.
In order to make COMPO EXPERT’s transport and delivery routes more efficient for customers, INVERTO examined the flows of goods to Italy, including how containers are handled at the port as well as storage and tracking. As a result, the existing topology, prices and supply chain were analysed and a catalogue of requirements created based on these.
These specifications were used in the next step to create a new invitation to tender in the service provider market. The offers received were evaluated by INVERTO and a supplier market and offer analysis was carried out. Based on this analysis, service providers were pre-selected and then a final decision made in further rounds of talks regarding the future service provider structure. The decisive criteria here included the reliability of partners in terms of quality and timing.
In addition, a further savings potential was identified and achieved in import transaction services of raw materials from Japan and South Africa, as well as pigment preparations for the flagship product Blaukorn. Terms with existing service providers were also successfully improved here thanks to tenders and subsequent negotiations.
- Cost savings achieved in the procurement of selected raw materials (including additives): 10.7% on average
- Long-term optimisation of indirect spend with an average savings potential of 9.9%
- Professionalisation of logistics services with a focus on reliability and quality