ASSESSMENT, EXECUTION AND TRAINING
CASE: Kamstrup
Price focus in the procurement department leads to major savings and organisational development Kamstrup and 4IMPROVE Consulting Group have undertaken a series of projects that place price focus and savings at the top of the agenda within Kamstrup’s procurement department. The entrepreneur, Olaf Kamstrup, founded Kamstrup in 1946. Today, it is one of the world’s leading suppliers of intelligent solutions for energy and water measurement. Kamstrup is home to wide expertise in technological development of electrical, heating, cooling and water solutions. The organisation has employees in more than 20 countries, and is owned by the energy company OK. PRICE FOCUS AND ORGANISATIONAL CHANGE In 2017, Kamstrup started looking seriously at procurement strategies. A pressing need for quick reductions in expenses was evident, and there was uncertainty regarding the actual savings potential, as well as a lack of resources to realise the savings. Instead of searching for how to save most efficiently, purchasers used too much time on new products and product modifications. Structure and an overview of expenses were missing, and ultimately this resulted in lost orders. Kamstup’s procurement department needed to kick-start a new, price-conscious approach, and begin to focus on saving money.
THE CHALLENGE: THE SOLUTION: THE RESULT:
In cooperation with 4IMPROVE, Kamstrup carried out a series of assessment and sourcing projects to identify and realise savings, and ensure the presence of sufficient resources in the procurement department. These assessments were structured so that Kamstrup experienced minimal organisational transformation; for example, several employees with strategic purchasing competences strengthened the procurement department, and tasks related to new products and product modifications were moved from Procurement to Operations. Power BI solutions that measured performance management were developed and, finally, the department’s competence levels were lifted using on-the-job training for individual employees. In addition to this, a training course in strategic procurement for all strategic purchasers was also undertaken. EXPERIENCE, SYSTEMATICNESS AND THOROUGHNESS 4IMPROVE performed an assessment of Kamstrup’s purchases in their entirety and identified the most attractive potentials.
An urgent need for reductions in expenses, uncertainty about actual saving potentials, and insufficient resources and competences to realise savings. The procurement department used time on new products and product modifications instead of focusing on savings. Lack of structure and over-view of expenses. Purchasers’ strategic purchasing competences needed an upgrade. The assessment identified the most attractive potentials. Subsequent execution with on-the-job training secured savings. On the basis of this successful initiative, a training course for the remaining strategic purchasers followed. Additionally, the development of a Performance Management set-up in Power BI was introduced. Unexpectedly large savings ensued within categories such as crude plastic and injection moulding. A strengthened procurement department with an updated appraisal method. Greater competitiveness amongst suppliers and alternatives, if a supplier does not perform. Synergy effects such as increased transparency and procurement focus across the organisation.
Experience, systematicness and thoroughness were all keywords when looking to pick the ripest cherries on the tree. Rapid reduction costs was the aim, and Kamstrup made the decision to focus on four selected cost-down procurement projects, where savings could be made relatively quickly. All Kamstrup’s products were categorised from a procurement perspective. A shared feature of the assessment and sourcing projects was the fact that it was large categories being dealt with from the top down. UNEXPECTEDLY LARGE SAVINGS I CRUDE PLASTIC AND INJECTION MOULDING From the beginning, both parties agreed that crude plastic represented a significant saving opportunity. Kamstrup had already identified the potential, but it quickly transpired that the supplier could not deliver to a satisfactory quality standard. 4IMPROVE identified a series of suppliers on the global market, and one of them was able to deliver satisfactory quality at an even lower price. Furthermore, they could deliver from more suitable geographical locations. With this exercise, Kamstrup achieved significant savings in two-digit percentage figures. Injection moulds are a procurement category where the results really surprised Allan I. Larsen, Procurement Manager. For some time, Kamstrup had been focusing on stabilising quality, both internally and externally. The specifications were sharp, and expectations were made clear, so the timing was right to find savings and involve more suppliers. This process delivered many positive surprises.
Allan I. Larsen, Procurement Manager explains: “We have some fantastic tool suppliers and made major savings. I had never thought it could be possible to get down to the prices we pay today.” Another crucial project was to expand the supplier portfolio. More suppliers create more competition which means that both new and old suppliers are forced to improve their performance. At the same time, Kamstrup is guaranteed alternative suppliers, if one of their existing ones does not perform. Kamstrup received help to improve its demand specifications. Now suppliers know what products to offer and at what prices, and within Kamstrup there is now an awareness of the difference between need to have and nice to have! INCREASED TRANPARENCY AND FOCUS Upgrading Kamstrup’s Performance Management set-up to a Power BI solution has provided increased transparency and a focus on purchasing across the organisation. This creates synergy between different departments at Kamstrup. In addition, separating all products into purchase categories has meant a higher degree of prioritisation and planning in the procurement department. Responsibility for product development and new products no longer lies with purchasers. They now have extra resources to allow them to focus on making savings. The department has been strengthened in terms of several employees with strategic procurement competences, and also through a tailor-made training course in strategic procurement, concluding with a final exam.
The lesson to be learned is that priority should be given to the use of resources, which will then result in savings.” Procurement Manager, Allan I. Larsen adds.
With 4IMPROVE’s help, we have improved our end-2-end processes, so we are far better equipped to meet market demands and possibilities – on both the purchasing and sales sides. Together, we have ensured supplier input into the next generation of products, and at the same time we have ensured savings on the existing product range.” Jens Ebbesen, Senior Vice President.
THE FUNDAMENTAL IDEA:
Assessment and sourcing projects based on experience, systematicness and thoroughness allows savings to be identified and realised, ensuring a quick reduction in costs. An increase in the number of employees and strategic procurement training has provided the procurement department with adequate resources and competences. A small organisational transformation was achieved through this training.
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