Process optimization of materials management and purchasing for an international construction group

Holding company of an international construction group

International construction group with 27 national companies and approx. 12,000 employees

Dr. Joachim Buse; Martin Nussbaumer

Inefficient request and ordering process for material procurement on construction sites (direct delivery and “just in time” delivery) and subcontractor services as well as predominantly manual ordering process for stock materials without digitalized inventory management and tracking. Consequence: pronounced maverick buying by project managers as well as unplanned equipment failures due to lack of spare parts.
Inefficient processes in the workflow organization lead to long delivery times for spare parts and self-organization of projects/workshops outside of defined company guidelines.
Significant quality and efficiency losses in materials management as well as local excess stocks with high capital commitment as a safety buffer to cover delivery times and avoid unplanned equipment failures.
Lack of cost awareness in materials management; cumbersome and long approval processes, also for B and C parts.
Especially in purchasing, there is a lack of experts with specialist knowledge, negotiating experience and assertiveness.

Roll-out of material group code that is the same for all three divisions
Creation of transparency for direct and indirect material costs across more than 30 national companies
Design of the strategic purchasing organization, identification of bundling options and definition of purchasing strategies with the establishment of an interim Head of Strategic Purchasing as well as a Program Office Manager for the restructuring of materials management and purchasing in the national subsidiaries (at the same time Senior Advisor to the Executive Board).
Despite the fact that the organization currently being set up, the defined target savings of EUR 2.5 million p.a. were exceeded.
Inventory of actual processes in two national companies (USA with many projects and medium order volumes and United Arab Emirates with few major projects and very high order volumes).
Redesign of the internal processes in materials management from the request for quotations, tendering procedures, catalogue procedures and individual order processing to ordering, goods receipt and invoice processing as a paperless, SAP-based, digital process including electronic quantity tracking and digitalized approval procedures.
Expansion of the new procurement procedure to include the procurement of spare parts and goods from companies within the Group and roll-out of the procedure to the central project organization for foreign projects (in countries where there is no branch office or subsidiary) based in Germany.

Internationally standardized process flows in all national companies with uniform software use (SAP Business One) and identical IT support with screen workstations in the respective national language.
Reorganization of the local purchasing organizations by recruiting professionally experienced purchasing managers with relevant expertise in civil engineering. Consistent division of labour between requirements and purchasing.
Introduction of a new reporting system with monthly measurement of purchasing success. Realization of significant savings in purchasing and reduction of working capital.
Acceleration of internal processes with shorter delivery times and targeted reduction of material overstocks.
Reduction of unscheduled equipment downtime.
Significant improvement of internal communication with at the same time decentralized responsibility of the respective employees along the process chain. Representative regulation for approvers to ensure an uninterrupted ordering process (reduction of ordering times by 65%).
Measured purchasing success from strategic negotiations and sourcing activities of the foreign subsidiaries in the mid single-digit million range.