Managing material groups
In some companies there is stil little transparency about requirements and unstructured cross-departmental purchasing. The consequences are waste and deflagration of effects. If you want to build up market power, you have to know your material groups and control them in a targeted manner.
By Sabine Ursel, freelance journalist
A manufacturer of aluminium profiles from Germany is currently optimising its material groups with external help. For the first time, powder coating procurement was carried out by means of a tender. An upstream value analysis had initially made it possible to identify all price-determining components and systematically estimate the costs.
The procurement data was “married” to a technically oriented powder coatings database. This made it possible to make the coatings comparable across manufacturers: Coatings with the same colour (RAL tone), surface, weather resistance as well as with the same flow and gloss level could be put into competition.
In this case, the material group project with measures such as tenders are accompanied by GMVK Procurement. A supporting tool is the GMVK Business Intelligence Software “4EBIT-Suite”. In the meantime, the aluminium specialist has achieved double-digit savings – the result of a mix of price reductions with existing suppliers and the implementation of new suppliers. “Due to the decline in sales caused by the economic situation, the intensity of competition is increasing. The aim must therefore be to record the validity of the individual prices with the highest possible market transparency, and this can only be achieved with intelligent tools”, emphasises GMVK Managing Director Thomas Mademann.
In order to be able to bundle requirements in a meaningful way, the different demand clusters must be separated more clearly. Purchasing power can only be achieved by clearly focusing on individual material groups. In material group management (MGM), the respective strategic buyer focuses on “their” material groups and not on the supplier level. They combine similar procurement goods in homogeneous supplier clusters, collects “suitable” requirements, screens the market, negotiates. Companies should categorise, among other things, according to application, source material, intended use, functionality and allocation to cost frames. The goals are better prices, higher quality, more specific know-how and more time for strategic considerations.
How to cluster
Classification allows both numbered and non-numbered materials to be assigned to procurement groups in a transparent manner. The materials are set in relation to material groups or material classes and then linked to strategic suppliers. Suppliers can be strategically grouped according to distribution level, for example.
Standard classification systems help to approach master data maintenance together with the suppliers. However, updating or enriching mass, article master and movement data must always run in parallel. Without targeted material group analysis, it is not possible to use multi-supplier catalogues. MGM enables better tracking of expenditures per material group, supplier and buyer. However, the purchasing department should be able to estimate the not inconsiderable expenditure before the start of a complex project.
Check Point // Hidden Resources
- Creation of transparency on demand and procurement markets
- Definition of required material and performance properties (Specs)
- Knowledge about the total costs of the material used
- Supplier structure: expandable? Cluster risks?
- Where consolidation and where diversification?
- Strategically group suppliers: e.g. by distribution level, size class, geographical markets
- How potential are my suppliers?
- How great is the purchasing power compared to suppliers?
- Which dependencies exist?
- Correct measurement of purchasing success at all times
- Making the value contribution of purchasing transparent
Source: GMVK Procurement GmbH (Essen)
