Today industrial enterprises’ purchasing turnover accounts for between 50 and 85 percent of total revenues. Therefore, optimizing purchasing is a key lever for attaining cutting costs.

Agamus Consult developed an innovative and practical methodology to identify economizing potential in purchasing, swiftly achieve savings in this area, and gain the leverage required to negotiate the best terms with suppliers over the long term.

We are at your side, helping you to accomplish all tasks from preparing specifications in close cooperation with your purchasers and in-house customers to conducting negotiations and closing long-term contracts. In addition to transferring this know-how to purchasers - if you wish - we can implement the efficient purchasing organization you need to ensure you continue to enjoy savings for many tomorrows to come.
All our projects entail easily quantified, fast and persistent return on investment.

The Analysis
Our first step is to analyze purchasing flows on site. To this end, we examine the purchasing families and their potential as well as all internal company processes related to purchasing, to include everything up to material requirements planning and supplier accounting.
Within a very brief time frame of two to three weeks, we formulate an accurate assessment of the actual situation, enabling us to take a “snapshot” of the purchasing function at a specific time. During this phase we focus on the following issues:

• Purchasing volume vs. revenues and purchasing segmentation: We identify the financial quantities that you can influence, that offer opportunities for negotiation, and that harbor potential.
• Then we get to the bottom of a vital issue: Are you buying at market price? Agamus Consult has developed a methodology that serves to answer this question. It entails the following fundamental methods:
• An analysis of prices paid vs. market developments: Our methodology allows us to compare purchasing prices that have been paid over a period of three to five years with indices based on data derived from statistics sources. Paid purchase prices are converted into an index and compared with market indices. Our procedure enables us to benchmark 95 percent of an enterprise’s purchases. A graphical view provides a visual indication of deviations, allowing specific goals to be defined.
• Price variance: In order to refine the analysis, we compare the different prices that have been paid to one or several providers at one or several sites for a given product or service.
• Volumetric analysis: Here we look at how your financial clout is used in negotiations (for example, annual negotiations rather than one-shot quote requests).
• Performance analysis, today and in the past: Which negotiations achieved which results?
• Benchmarking: We benchmark the prices you have paid using our internal database to compare price in terms of volume and units.
• The best tools in the world are worthless unless applied correctly. For this reason, Agamus Consult has devised a qualification matrix to rate purchasers according a graduated scale. This is a vital prerequisite for operating profitably and ensuring that the most qualified buyer is allocated to a product family. Agamus Consult provides the necessary training and orientation.
• We analyze the entire purchasing/material requirements planning process, covering all links in the chain from the consumer (in-house customer) to bill settlement through to creditor accounting (information flows; EDP systems; who does what?)
• Cash-flow analysis: Our assessment also examines the three components that impact cash flow - payables, receivables and inventory. We apply the best practices we have developed to scrutinize all the internal processes and activities related to payables and receivables accounting. Beyond that, we compare the customer’s and suppliers’ terms of payment with the standard terms prevailing in the given industry. Finally, we analyze the inventory of raw materials, unfinished goods and finished goods.

Implementation
The implementation entails

• Putting our recommendations into practice in close cooperation with your staff
• Achieving the savings potential we have identified, in part or in full
• Supporting the enterprise in making strategic decisions such as «make or buy?»
• Supporting purchasers and consumers in all purchasing tasks, from preparing viable specifications to negotiating with suppliers, while factoring quality and service aspects into the equation
• Transferring know-how, to include training staff to handle tools developed by Agamus: Prices vs. market indices, segmentation of purchase prices using macroeconomic benchmarks, optimizing terms of payment, establishing microeconomic benchmarks, and so forth.
• Reengineering your purchasing organization: If necessary, we will restructure purchasing/material requirements planning in order to secure beneficial purchasing terms, that is, to achieve savings in your P&L statement
• Ensuring enduring returns on our efforts

Your workforce plays a key role in the implement phase; for example, your personnel team up with Agamus Consult experts, jointly participating in all negotiations with purchasers. This serves to convey know-how in practical application, ensuring long-term retention of newly won skills.
 
The aforementioned methods and tools are applied in most European countries. This is particularly beneficial for multinational corporations. In addition, it serves to set up a national reference system.
 
With a consultant team staffed with international experts who have wide-ranging language skills, we are able to manage purchasing projects across many countries (to bundle purchasing volumes) and source materials on a global scale.

With the procedure outlined above, we were able to achieve significant results on behalf of well-known corporations:

• A ROI of one to five for a multinational corporation engaged in the production and processing of fissile and fertile materials.
• Negotiating an over 20 percent improvement in terms, for example, for the purchasing family of industry gases, on behalf of an enterprise operating in the aviation industry.

Jean-Philippe Jaillant & Marc Kräutle, Agamus Consult