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Optimizing Indirect Spend: Consulting project Valora – the quiet star of Swiss retail optimises indirect sourcing

Companies with separate independent brands face a particular challenge when it comes to consolidating sourcing activities across their businesses. But it is precisely because of this that there is often a great deal of scope for improvement. With operations throughout Europe, Valora has used the “VICE – Valora Indirect Cost Excellence” project to demonstrate how this can be achieved successfully for indirect sourcing.

They are familiar names for consumers and trade alike – kkiosk, avec., Presse+Buch, and Spettacolo, one of the leading coffee bar chains in Switzerland. The group behind them is less well known, despite the fact that it has 1,407 sales outlets, more than 6,500 employees and achieved net revenue of around CHF 2.9 billion in 2008, making it one of the biggest players in the European retail sector. All of the brands above belong to Valora Holding AG, a company based in Muttenz near Basel in Switzerland.

Is sourcing the answer? Bringing non-commercial goods into the fold

Bearing in mind the sheer size of the company, it‘s soon evident that there are significant purchasing volumes involved, and not only in terms of merchandise. Indirect sourcing – or non-commercial goods – accounts for around a sixth of the sales generated by chain stores. At Valora, this includes logistics, vehicles, store construction, facility management and telecommunications

The management team at Valora recognised that a lack of standardised ordering processes in this sector was resulting in cost disadvantages. There was no sourcing department dedicated to non-commercial goods. Consequently, the new Head of Corporate Purchasing Christian Grunder was tasked with reducing costs for non-commercial goods right across the company. For the first time, the requirements of the group‘s companies abroad were also to be pooled.

Differences in sourcing behaviour

Grunder  formed  the  specialist  department “logistics, sourcing, non-commercial goods“. The “VICE” project was launched parallel to this. The first step was to create transparency  across  the  board  about  who sources what from whom.

The product group structure  for  non-commercial  goods  consisted of 13 main groups and more than 80 sub-segments.  The  employees  previously responsible  for  sourcing  these  goods  and services had some initial reservations about the project. However, these concerns were duly dispelled thanks to the high level of transparency and the speed with which results were achieved.

The project soon brought the conclusion of a number of sourcing initiatives. In addition to successful negotiations, this was due above all to improvements made in the various processes. The considerable improvements achieved by pooling transport volumes for road freight at two sites are just one example of this. The new sourcing department for non-commercial goods has now become firmly established as an expert partner for all sections of Valora AG.

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