One of the most important parameters for corporate performance

Interview with Gerd Kerkhoff, Managing Director of Kerkhoff Consulting

Mr. Kerkhoff, within the course of the last economic crisis, many companies had changed their added-value and logistics processes with a view to yield or returns. There was the trend towards so-called single sourcing strategies or the optimization of working capital. What's your assessment of such measures?

Kerkhoff: Within the scope of optimization of the working capital, companies will tie up the least possible capital in the value-added process to achieve the maximum possible independence from banks. Briefly stated: You'll manage inventories so that the least possible amount of money will be needed for the production process. That's why it's certainly an excellent measure for a leaner setup not only in times of crisis. In light of the credit crunch on the capital market, my opinion is that working capital optimization is an outstanding instrument to be more independent financially.

In contrast, single sourcing has its downside: If, for whatever reason, a supplier is unable to weather dire economic straits, the company buying from it will also be in jeopardy with its production process. You'll probably remember: Some of the first companies to file for insolvency were automotive suppliers – among them, one producer of brake linings. Certain car manufacturers procured them exclusively from said company. As a result, some models could temporarily no longer be delivered because the car manufacturers had no second supplier for brake linings. Of course, after such an experience, you'll try to avoid any similar dependency and turn to double or multiple sourcing.

How can modern purchasing management contribute to corporate performance?

Kerkhoff: As already mentioned, modern purchasing management sets great store on working capital optimization. At the same time, buyers will purchase most economically to thus establish an accordingly large profit contribution. In most sectors of the industry, purchasing is one of the biggest cost factors and thus the most eminent parameter for corporate performance.

For which companies can it be of interest to obtain consulting on the subject of purchase optimization?

Kerkhoff: Basically, it's of interest across all industrial sectors to have external specialists check the optimization potential in the purchasing area. Purchasing has long been underestimated in terms of business management. However, enterprises are becoming increasingly aware of just how eminently important purchasing really is for the success of a business. A consultant will be able to significantly optimize economic functions. Not only with regard to terms and conditions, but also in terms of the organization and process integration. That means purchasing will be better integrated and tied into the entire value-added process. And such consulting will be reflected in euros and cents.

Which challenges are currently relevant and acute for companies in the purchasing area?

Kerkhoff: A particular challenge in purchasing is to prepare the people working there for any global changes. Employees must be "picked up"; that means, they need to be trained through appropriate projects so that they will be able to optimally master these upcoming developments. As a management consulting firm with a special focus on purchasing, we have been assisting companies for many years to continuously improve their setup. The objective should be to train professional buyers, cost analysts, process designers, etc.