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09/01/2011

Keeping things in order is half the profit

In a company's own organization, profits are hidden in purchasing


By Michael Dörfler

THE DREAM OF ALL BUYERS: According to a not quite serious rule of thumb among procurement people, 50 percent can be immediately saved in office equipment. How fast that can happen shows the experience of an employee who asked for one eraser at the issuing counter for office material: The person responsible for stationery cut the desired part in half and only handed over one half of the eraser. Achim Probst does not exactly like such activists in savings. "Live and let live – that motto proved right for me as a buyer." For 15 years, he has been responsible for procurement at the engineering services provider Müller BBW in Planegg in Upper Bavaria. The company just finished the equipment of its new € 15 million administrative building with completely new office furniture, office equipment and material and IT infrastructure.

The company relied on the collaboration with reliable suppliers enjoying many years of business relations. When purchasing office furniture, for instance, Probst does not so much want "to save a few euros per desk set". In technical terms, the professionally trained carpenter could not be fooled anyway by office furniture suppliers.

It's important for him that the supplier gives him a good price and will not be stingy with his service. "He'll also come for only minor installations" says Probst. His primary objective is that the company's work flow and organization will continue to run without interruptions. It's definitely not about forcing the cheapest bidder to make yet more concessions in purchasing. "Price is not what's decisive", emphasizes Martin Wittler, Sales Director of Office Depot. The provider of office equipment and services supports its customers to improve their purchasing processes by means of Web-based procurement. This savings model provides that the costs are disclosed which a company incurs for ordering processes. Savings potentials can then be detected for customers and suppliers. The objective should be, after all, that the partners collaborate for as long as possible. Ideally, activities should be thoroughly reviewed every five to seven years.

The return for such methodical procedures: The average procurement costs of EUR100 to 150 per workplace can be reduced by fully 10 to 50 percent – Volkmar Klein is convinced of it; he is the divisional manager of Benchmark Services of the Bundesverband Materialwirtschaft, Einkauf und Logistik e.V. (BME – Federal Association of Materials Management, Purchasing and Logistics, registered).


Getting rid of iron rations

Olaf Kreienbrink, procurement expert at Kerkhoff Consulting, says: "It's more effective to realize savings in processes than in stationery." When a pack of 3 pencils costs EUR 0.99, but the ordering process for pencils shows in the books at EUR 80, it's obvious where the savings potential will be. Kreienbrink also detected other cost drivers: "Hoards laid up for office material can be discovered in many companies." An investigation of procurement processes in a large enterprise revealed that 2,000 ring binders were laid up in hoards at the workplaces – nobody had been using this office material. This shows what happens when large quantities of a product are bought without giving it much thought, just because it's particularly low priced. "Sometime later, the stuff will just be lying around", the purchasing expert complains. Nobody is allowed to touch these iron rations but people go on buying additional material instead of just using up what's already on location.

A way out of the trap: demand-oriented purchases. People shying away from this expenditure can become active themselves by small means. Even for manageable demands, BME expert Klein recommends continuous price comparisons: "When small amounts of consumables are needed, just keep looking from time to time." That would also apply for EDP articles which are subject to major price fluctuations. Dealers should be frequently asked in this case. Online shop systems can also be used for such activities to compare all sorts of products from ring binders to envelopes.

If a more specific selection is required for orientation purposes, the BME Benchmark Service has an overview where buyers are asked about their prices.

Comparison helps in the decision

According to Klein's findings, there are great differences in average prices which may be up to 50 percent for the same product. Thus, the highest price for 1,000 envelopes is EUR 12.70 and the lowest EUR 8.45. Colored A4- size ring binders range from EUR 1.09 to 1.69. Purchasing office furniture is completely different. Important is not the lowest price seller, but the one with the best offer in terms of ergonomics and seating comfort. In this case, the "Bso-study 2011" by the Bso forum in the BSO Verband Büro-, Sitz und Objektmöbel e.V. (BSO Association of Office, Seating and Object Furniture) shows the comfort provided for employees at various companies. Small companies with 50 office workplaces are the thriftiest. Their most frequently used chair is the ordinary office swivel chair with a permanent backrest and rigid seat. Employees in companies with more than 200 office workplaces will have a higher seating furniture standard, e.g. an office swivel chair with synchronous mechanism.

Motivated by motion

People spending their workday rigidly sitting at their desk apparently are held in lower esteem than those who may use an ergonomic seating solution. Brian Boyd, Managing Director at the office furniture manufacturer HAG Scandinavian Business Seating, explains: "While sitting, one should be absolutely in a controlled sequence of movement", says Boyd. Employees will then be more flexible in the true sense of the word.