Case study: Beiersdorf's procurement strategy

Thèmes abordés

Beiersdorf's procurement strategy, Maturity Assessment Tool, purchasing function, strategy, marketing, purchasing department, supplier relationship management, purchasing tools, cas study

Résumé du document

When it comes to procurement strategy, there was not a specific procurement strategy which could have directly influenced future profitability and cash flows for Beiersdorf in 2005. In addition, Beiersdorf's strategy mainly focused on price rather than a broader sphere which included quality, innovations, time-to-market, growth or working capital. Besides, Beiersdorf couldn't execute category strategies to address different demands of various materials that were not in place. Even if one of the concerns was to be sure of the quality of all products, since if one product in one brand group were to be discredited, the whole brand would suffer, the goal of the purchasing department was mostly to reduce the volume of expenses of whatever nature under the area of procurement.

Extraits

[...] Case study: Beiersdorf's procurement strategy I. Procurement strategy When it comes to procurement strategy, there was not a specific procurement strategy which could have directly influenced future profitability and cash flows for Beiersdorf in 2005. In addition, Beiersdorf's strategy mainly focused on price rather than a broader sphere which included quality, innovations, time-to-market, growth or working capital. Besides, Beiersdorf couldn't execute category strategies to address different demands of various materials that were not in place. Even if one of the concerns was to be sure of the quality of all products, since if one product in one brand group were to be discredited, the whole brand would suffer, the goal of the purchasing department was mostly to reduce the volume of expenses of whatever nature under the area of procurement. [...]

[...] In addition, no early involvement was in the sourcing process and strategic tools were not less frequently compared with competitors. Thus, concerning the sourcing orientation, we can consider that Beiersdorf was, in 2005, between phase 1 (transaction orientation), for the suppliers that corresponded to portfolio that were not under the purchasing department responsibility, and phase due to the mention of traditional methods. For a better progression, we can suggest Beiersdorf to change this strategy. Often, when it is not the purchasing department which is in charge, other people have a tendency of choosing suppliers that are nice to them. [...]

[...] Also, the company should make more extensive studies about their needs, in order to have a more effective division of the strategy. Making a distinction between indirect and direct purchasing could be, for example, a possibility to reduce the costs. Concerning the criteria's and focus that the company use to choose their suppliers, as well as Category Sourcing Management, we can also consider that in 2005, the company was between phase 1 and 2. In order to organise their strategy, they now need to create an effective supplier classification, as well as define different policies concerning the relationships they have with these suppliers. [...]

[...] According to the Tool, a good way to progress is to regularly make TCO (Total Cost of Ownership) Analysis. However, what would be interesting in this case is to implement regular TVO (Total Value of Ownership) instead. This new methodology is now implemented in ancient companies with a high maturity level. The concept Total Value of Ownership (TVO) does include the possible ‘revenue-enhancing' effects of buying a certain item instead of one another, which is absent in TCO. Thus, applying the principle based on this methodology would help Beiersdorf to reach a better level in procurement strategy. [...]

[...] Also, they need to create a periodic review of suppliers' performance, and reduce the number of suppliers they have, in order to avoid any dependency from a supplier. Purchasing tools and execution didn't have a uniform standard in most of places. IT supports were not complete because a lack of global sourcing system or a sourcing cockpit. Total cost of system, target costing or design-to-cost didn't show in Beiersdorf's purchasing execution. Purchasing department didn't pay a lot of efforts recruiting and maintaining employees, which led to poor integration performance at Beiersdorf. Further improvement of employees in Beiersdorf was not clear. [...]