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1 | Danfoss Procurement Årsdage for offentligt indkøb 2015 Strategisk indkøb og gevinstrealisering Torben Pedersen, SVP Danfoss Procurement
1 | Danfoss Procurement
Årsdage for offentligt indkøb 2015 Strategisk indkøb og gevinstrealisering
Torben Pedersen, SVP Danfoss Procurement
2 | Danfoss Procurement
3 | Danfoss Procurement
4 | Corporate presentation, January 2015
Contents
Fact, figures & org Vision – how do we create impact Enablers to be successful How do we drive change, learnings & Issues
5 │
Danfoss Facts and Figures Sales 34,007m DKK
Number of employees globally
25,000
Factories, globally 64 in 19 countries
Sales, globally >100 countries
Own sales companies, globally
in 51 countries
Top 3 Markets US, Germany & China
Total spend (direct + indirect)
Bn 11+5 Dkk
Total number of suppliers (direct)
3750 + 15000
Total number of SKU’s
80.000
People working in procurement
~500
6 │
Danfoss Procurement
Electrical Parts Raw Materials Mechanical
Parts
Pressed Parts
Iron Casting
Turned & Hot stamped Parts
Steel & Alu Casting
C Parts (fixing, springs,
bearings)
EMS & PCB
Electronic Components
Motors & Fans
Electro-mechanics
Plastic & Sealing
Packaging & Chemicals
Steel & Non-Ferrous
Finished Products
TSM and SD
Segment Procurement
Category Management
Danfoss Drives segment
Danfoss Heating segment
Danfoss cooling segment
Danfoss Power Solutions
Administration & IT
Facilities & Investments
Productions & Capex
Transportation
China
India
Indirect
Indirect material
Danfoss Procurement – Who and what?
• Commercial activities fully centralized to gain leverage • Implementation and operational procurement organized locally
7 | Danfoss Procurement
Where are we heading?
Value creation potential
Transactional orientation
Commercial orientation
Category Management
Internal integration
External integration
Value chain integration
Focus Serve the factory Reduce price Savings through synergy
Total cost of ownership
Supply chain optimization
Total customer satisfaction
Activities Clerical Order
processing
Commercial Tendering Negotiating Approved
supplier lists
Volume consolidation
Contracting Global sourcing Global supplier
Cross-funct. buying teams
Systems integration
Vendor rating Performance
based contracts
Outsourcing Co-dev. Shared cost
models Supplier dev. SC optimization
Customer-driven activities
Joint dev. / integration of supplier tech
Time
Functional Focus (CM) Cross Functional Focus (PP)
• Lots of ways to generate ideas to create impact. Creating strategies and idea generation is easy
• Problem is implementation cross functional ideas and sustaining “new way of working” (when the consultants have left)
8 | Danfoss Procurement
Creating financial impact (indirect procurement)
Address all levers to create impact in a cross-functional focus. Category management programs started in all 5 main categories.
Traditional procurement - benchmark & negotiations, E- auctions, workshops
Leverage on consolidation effects
Demand management/reduction and behavior change
(travel, vending machines, electricity, Lync, etc.)
Outsourcing of non-core activities (Cleaning, canteens, building maintenance, etc.)
Re-specification and cost out activities (change shipping route, change to different brand, etc.)
• Consortium buying Apply strong and structured performance management
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5 Enablers of a successful Procurement organization
• Top Management support • Skilled empowered
organization • Idea tracking tool • Compliance • TCO approach & Demand
management
Danfoss Procurement
10 │
5 Enablers of a successful Procurement organization
Top Management support • Acknowledgement of
results by EC
• Procurement part of overall strategy
• Impact as part of budget
Danfoss Procurement
11 │
5 Enablers of a successful Procurement organization
Skilled empowered organization • Competency assessment
• Survey on performance mgmt (EPS)
• Performance mgmt
• Dedicated support resources
• Shared KPI’s
• If you want things done in Danfoss – put it in the bonus agreement!
Danfoss Procurement
12 │ Danfoss Procurement
5 Enablers of a successful Procurement organization
Idea tracking tool • ALL ideas logged, tracked
and followed up
• Full visibility to pipeline
• Different levers to drive balanced pipeline
• Visibility to from personal to BU/Div/Category and Danfoss level
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Compliance
• Systems usability required
• Training of everybody ordering anything
• Clear roles and responsibilities
• Maverick buying consequences
Danfoss Procurement
5 Enablers of a successful Procurement organization
14 │
TCO approach (indirect)
Danfoss Procurement
5 Enablers of a successful Procurement organization
• 61% is P2P related • Freight rates negotiations • Microsoft renegotiation • Gas & Electricity agreements • PwC renegotiation • HP x% reduction
• 26% is other variable cost/TCO
• Direct flow projects • Duty drawback projects • PS tool optimations (DECO)
• Only 6% is demand reduction • Energy consumtion projects • NAM cutting tools proejct • Microsoft licenses management
15 │ Danfoss Procurement
How do we drive change in Danfoss
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Biggest road blocks seen along the way
• Middle management “The clay layer” resisting change
• Organization doesn’t reflect the vision – lack of empowerment
• Skills not in place to support new way of working
• Conflicting KPI’s
• Under communication of change and proof it works
17 │ Danfoss Procurement
Enablers in place & roadblocks removed
We delivered
Impact: Records results 2 years in a row
Payment terms: 20% increase since 2012
Motivation and engagement all time high
18 | Danfoss Procurement
