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15 April 2014 | Gurjit Degun
Danish component manufacturer Danfoss transformed its indirect procurement through centralisation, according to the man responsible.
Thomas Linneberg, vice president of indirect procurement, took up the challenge in 2011 to create more value from indirect purchasing.
He told the ProcureCon Indirect conference in London that spend management at the company, which produces engineering products and services for air conditioning and cooling food, was very fragmented.
“Everyone could buy anything from anywhere they wanted,” he told delegates. “We had 24,000 indirect suppliers which was too many for our company, there were no clear roles or accountability, and performance was very low.”
Linneberg explained one of the first things he did was speak to everyone in the organisation “to ensure people could give their input” into the transformation. He added this “was very valuable and very tough”.
To gain full stakeholder buy-in, Linneberg set up a workshop with the top 24 people at the company and shared his ambitions and action plan. “It turned into the best four-hour workshop,” he said. “We made sure there was a clear alignment and a clear sign-off.”
To make sure everyone was moving in the same direction, Linneberg introduced an indirect procurement standard, to provide purchasing guidelines. “It shows people how to behave,” he told the conference. “We still have maverick buying but it’s not as much as it used to be. We have improved our supplier list too. It’s tough work, but for us it’s the best way of continuing.”
Danfoss now has a centralised indirect procurement function. “We have moved resources from the divisions into being part of the central organisation. We are 50 people working with tactical and strategic indirect procurement activities.
“We have now accumulated savings and we are more than one year [ahead of our estimated savings]. With the number of suppliers, we [have almost met the target set] for the end of this year.