Procurement Optimisation Project
Multidisciplinary project management makes specialist functions a long-term player in change processes
About Sto AG
Successful companies sell successful products – but long-term success is not just based on good products. Reliability and tradition, innovation and sustainable production, satisfied customers and a motivated workforce are all crucial. Sto has been producing and developing products for the construction sector since it was first established in 1955 and is constantly working to meet all these key criteria.
Three things in particular have helped Sto become the dynamic company it is today –innovation, growth, and saving energy. Thanks to continuous research, it has helped shape numerous trends in the industry and has driven forward developments that in many cases have become part and parcel of everyday working life on construction sites.
By funding growth independently and undertaking strategically advantageous acquisitions, the company has developed at a consistent pace that has always been set by the founders. What’s more, Sto was developing energy-saving products long before energy saving became the hot topic it is today. After years of expansion, Sto has transformed from a German company organised along traditional lines to an international market leader for insulated cladding systems.
By regularly initiating optimisation projects to adjust individual structures to new framework conditions, Sto has proven that it regards innovation and continuous improvement as much more than just buzzwords.
But although these projects have been started, they have not always been rolled out throughout the entire company. For example, Sto had a central procurement function that was highly effective in most areas and yet, in practice, the structure of procurement differed greatly in certain sections. Some specialist functions and subsidiaries bought in their own products and services without involving the central procurement function. Many functions and subsidiaries placed their own orders and negotiated their own prices and conditions with suppliers independently.
All this meant that the company as a whole was working with a huge array of suppliers and service providers. Because requirements weren’t being pooled, goods and services were being purchased at different prices and with different quality standards. As a result, the company was wasting opportunities to secure good prices and optimum procurement results.
On-the-job procurement optimisation - starting with marketing procurement
It was obvious that Sto could dramatically reduce its procurement costs by pooling requirements and buying in goods and services centrally. The company had been working to improve things for quite some time, but success had been slow in coming in certain quarters. Procurement consultants from INVERTO were therefore brought on board to launch a project designed to improve terms and conditions where the relevant steps had not yet been taken.
At the same time, the project was to be conducted in such a way that the optimised procurement process would be implemented and “lived out” across all of Sto’s specialist functions and subsidiaries. Procurement of marketing services was chosen as the first to undergo process optimisation and see the introduction of training measures. A few subsidiaries aside, marketing was the last specialist function to still buy in goods and services without any input from the procurement function.
Moreover, the procurement of marketing services was an ideal place to get the desired process of transformation properly on track at Sto. Indeed, traditionally, the corresponding products and services are usually bought in by the specialist functions on the basis that they are more familiar with the requirements than procurement and creativity cannot be measured or put out to tender. The optimised procurement process was therefore to be trialled with input from all the specialist functions and subsidiaries, but under the control of the procurement function alone. It would then be tailored to the wide-ranging requirements in the company.
The guiding principle throughout the entire project was to ensure the new process was accepted by all parties. This was essential if the implementation stage and work with suppliers and service providers was to forge ahead successfully and translate into high-quality results in projects.
Multidisciplinary project management and a clear schedule of tasks
The newly designed procurement process was based on invitations to tender, pitches and negotiations that would be managed centrally through the procurement function for the first time. To ensure the specialist functions had a concrete role in the procurement process, the buyers were to ascertain their requirements in detail at the start then communicate these requirements to suppliers and service providers and check they were being met throughout the procurement process.
For marketing in particular, it is important to identify all the requirements of specialist functions and individual senior team members, since there is often a fear that involving the procurement function will compromise the quality and therefore efficacy of marketing. Bringing on board everyone involved and forming multidisciplinary project teams would help allay such fears.
Transparent procedures for all departments
A precise schedule of tasks was also compiled that listed in detail who was to do what and all the parties worked through it step by step. This ensured that the procedure adopted during the project was transparent to all. The procurement project managers also included all functions and subsidiaries in each and every step of the project from the outset. This was achieved through intensive interviews that took into account all claims. Large regular meetings were arranged to ensure decisions were taken with as much agreement as possible between procurement and the specialist functions.
Finally, supplier negotiations were held jointly by procurement and the specialist functions so that the specialists were directly involved in selecting suppliers and so that important elimination criteria were clarified in the very first meetings with suppliers.
“Lived out” procurement processes in the company
New procurement processes are now “lived out” at Sto Ensuring everyone was “on board” with the process from the outset paid dividends, even if it did involve a lot of work at times. Besides delivering a good price/performance ratio, the methods employed also ensured that suppliers met all the quality-based requirements at Sto on a long-term basis.
Today, everyone at Sto is pulling together and the new procurement process has been accepted by the specialist functions and is being “lived out” in the company. Involving the specialist functions and subsidiaries was the key to ensuring decisions taken in the procurement project were well received throughout the company. This meant that these decisions could also be implemented at Sto in the future.
The results of procurement optimisation speak for themselves and have won over everyone at the company, giving Sto a new, properly qualified supplier pool and an excellent price/performance ratio. Procurement results improved significantly in the requirements categories that were investigated. Costs were lowered and savings achieved that enabled the marketing function to make more efficient use of its budget.
In concrete terms, that meant more marketing activities for the same money. What’s more, by implementing the new procedures, the procurement team and the specialist functions involved in procurement processes also acquired new expertise that complemented the structures in place at Sto and cleared the way for continuous improvement.