Dr. Siegfried Kiese is head of WACKER’s Technical Procurement & Logistics department. Since obtaining his doctorate in engineering, he has held various engineering-related managerial posts at WACKER over the last 25 years. His recipe for successful technical procurement? A combination of three things: technical know-how, market expertise and strategic supplier management. The father of two grown-up children goes running to improve his stamina, while he hones his judgment and accuracy on the golf course.
Dr. Kiese, WACKER operates in complex, global markets. How is Technical Procurement organized to cope with this?
Our supplier management system has been divided into 18 category management teams, each managing every groupwide purchase in their field. The buyers concerned – whether responsible for technical materials, packaging, engineering services or assembly – liaise closely with Engineering and the various production plants. The key message is: procurement is not the sole domain of purchasing staff, but rather a result of teamwork.
How qualified is your team for these tasks?
Of the 80 people at Technical Procurement in Germany, 40 percent have a college degree or the equivalent. Ten years ago, this figure was less than 10 percent. Apart from procurement specialists, we now work increasingly with chemists, physicists, and electrical and industrial engineers. We’re also making much more use of local experts abroad, since they are thoroughly familiar with our core markets. And through our daily dealings with our customers – WACKER’s engineering departments and plants – we keep on learning, and so do they. As a result of this close interaction, we are well aware of our own needs, can assess active relationships with suppliers, and are able to successfully target new ones.
That sounds like a never- ending task.
That’s exactly what it is. All our suppliers have one thing in common: they provide products that help us compete on world markets. Their work promotes WACKER’s success. But that means they must be up among the best. Plus, they must keep on their toes because we continually compare them with suppliers from around the world.
Does that also apply to companies you have been working with for decades?
We attach great importance to longstanding partnerships, since both sides learn from each other. And that has a beneficial effect on quality and productivity. Partnership and teamwork lead to sustained improvement. That said, we don’t want to miss out on the knowledge and innovations that new suppliers can offer. So, it’s essential to have a sensible mix of longstanding partners and newcomers to the fold.
Many of our logistics partners have been doing business with us for a long time. Over half of our suppliers in Europe have been with us for more than ten years. However, we also have a changeover rate of 20 percent. This gives us the best of both worlds – many years of experience and access to the expertise of other companies. Changes to our supplier portfolio are often unavoidable if we are to satisfy our own quality standards and keep our quality commitments to customers. Our willingness to switch suppliers reduces our dependence, provides incentives for longstanding and recent partners, and creates synergies.
Wouldn’t it be better to establish well-run, exclusive and permanent processes with a few economically strong suppliers?
Exclusiveness is something we pursue in only a few select segments, where the expertise we share with suppliers must be protected. Elsewhere, we seek out suppliers that are successfully serving many customers and have a good reputation for innovation, price and quality. In a competitive process, we choose the best suppliers on the market. We benefit from their expertise and they gain competitive strength from being in partnership with us. We experience this at first hand at our annual Suppliers’ Day, which is attended by well over 100 companies.
Such a strategy could lead to higher costs. How important is price in all of this?
Where three providers offer identical service packages for a simple product, price is generally the deciding factor. For more complex procurement processes, we follow the Total Cost of Ownership Principle: the purchase price is not the only cost incurred during the lifetime of a product. Delivery times, energy efficiency, life expectancy or residual product value are all just as crucial as service. Ultimately, we choose the best overall package of costs and benefits.
WACKER adheres to certain ethical standards. What role do they play in the relationship with suppliers?
All WACKER’s partners must sign up to our sustainability principles, which are underpinned by our membership of the Global Compact – an initiative launched jointly by the UN and companies around the world. We especially expect new suppliers to provide comprehensive self-disclosure. And before contracts are signed or authorization is given, we conduct environmental and social audits.
Now for a practical question: How does Technical Procurement at WACKER manage the 320,000 or so purchase requests it receives every year?
We have an electronic procurement system which allows our engineering departments and plants, on the basis of framework agreements, to call off or order products and services independently and efficiently. In Germany, more than 70 percent of our 600,000 individual items are handled in this way. It’s all automated – from ordering to delivery, to inspection, to payment authorization and payment. We have over 100 electronic catalogs for managing about one-third of all the items. In relation to the roughly 400,000 order items in SAP, automated ordering represents 50 percent. Paradoxically, this 50 percent makes up less than ten percent of our actual purchasing volume. The bulk of expenditure flows into more complex products, such as high-tech system components. We are implementing this approach step by step across our organizations in the USA and China, too.
Where do you find new suppliers – and how do you decide if they are good enough for WACKER?
Many companies approach us, because they would like to work with us. But, in addition, we look for suppliers ourselves. Each prospective supplier must submit to a background check that includes comprehensive self-disclosure. We use detailed checklists to solicit precise details of how the companies envision the supply relationship and whether they can meet our requirements regarding, for example, delivery times, quality of products, and the environmental aspects of production.
Can you protect yourself against all risks?
Of course not. But we can mitigate them through our highly effective risk management system. We perform a comprehensive risk analysis on all our suppliers. Our buyers scrutinize everything. Where do we have critical requirements? Can they be met? Does the quality still meet our standards? Are deliveries on time? Is the supplier’s business struggling or facing insolvency? We also use other data sources, such as D&B – a service provider that analyzes the payment history and financial data (like sales, profits and equity) of more than 145 million companies worldwide, including 4.8 million in Germany. We only work with companies that we know. Our approach ensures that we are able to accurately appraise our partners. It also guarantees a win-win situation for both parties.
Quality and safety: supplier management
ensures smooth workflows.
Systematic supplier management presupposes systematic quality control. WACKER was thus able to greatly increase the quality of its logistics providers over the last ten years.
Every year, WACKER’s Technical Procurement team handles some 320,000 orders. Automated e-catalogs process over 70 percent of these orders. Their value accounts for 10 to 20 percent of our purchasing volume.
A Strong Community
Currently, 6,000 partners from a truly broad range of industries supply WACKER with services and raw and processed materials. Over 15,000 different suppliers have so far had business dealings with WACKER.
Worldwide Purchasing Volume