There is a need for the Western European manufacturers of agriculture equipment to streamline their purchasing departments.

Key Value Driver

When it is compared to other industries, the Western European manufacturers tend to be biting their dust, basically, they lack in the qualification, processing as well as the application of the systems tools and methods of their staff.

Du vadybos modeliai

By increasing their importing activities to a best-practice level by a thorough improvement program, the manufacturers of agricultural equipment’s are able to improve 440 million euros worth cost position within three years’ time, they would try to improve their positions by putting themselves in strong positions in the fast-growing countries and fight off their competitors such as China or India, in their traditional markets. And finally, more purchasing organizations are important if the best-cost country sourcing is achieved for their goals, according to the new purchasing best-practice benchmarking report on Agricultural machinery.

In order to continue their success stories, the rapid growth would not be enough for the Western European manufacturers of the agricultural machinery.

Significant optimization potential

In order to continue their success stories, the rapid growth would not be enough for the Western European manufacturers of the agricultural machinery. If they wish to remain the top sellers in Europe and the United States and still wish to be the top sellers across emerging countries then they have to apply other levers in order to continue their pursuit. This includes:

  • The efficiency of sales
  • After-sales services development
  • Innovation in services
  • Product optimization
  • Reduction in the cost
  • Adequate value establishment
  • Creation of structures for new markets
  • Making a partnership with the worthy local players

But it has been proved that the strongest lever for agriculture manufacturers lies in purchasing. Western European Manufacturers of farm equipment possess a deep reservoir of talent that is required to be addressed by brilliant purchasing organizations, with an average material cost share of nearly 60 percents. According to a recent study, during the last 36 months, the agricultural equipment manufacturers focused only on 55 percents of their purchasing volumes by regular optimization projects. This ratio is nothing compared to the 96 percents that carmakers had addressed. But the only one that was worse off than they were the manufacturers of the construction equipment’s that had 43 percents of addressed purchasing volume. But due to their improvement in purchasing volume, they managed to generate 4.5 percents of savings on average which helped placed them in the bottom third rank of the benchmarking. If Western Europe’s manufacturers of agricultural equipment intend to catch up with top performers, they have to act right now. Such efforts will definitely pay off.

Transparency is key

In order to purchase some property of the Western European manufacturers of agricultural equipment’s, they can learn to do that by looking at how other companies do it. Improvement needs comprise staff qualification measures, processes and the use of state-of-the-art systems, tools and methods.

Hence to reduce successfully the purchasing costs, the employees belonging to these companies require some sort of transparency about market prices as well as supplier bids. In order to fulfil this requirement, the IT system is capable via a press of a button to provide the required data for analysis- and the purchasing staff is able to use advanced tools and methods.  However, the greatest flaw in agricultural equipment companies’ processes lies in the structuring of their bidding procedures for the granting of contracts. Other industries are more professional in this aspect.

Ambitious Plan

Western European manufacturers of agricultural equipment have finally understood that best-cost country sourcing is the key for improvement lever. The model cycles for the agricultural equipment are longer as compared to other industries, but their purchasing unit is smaller. The result of this is that it is more difficult to move on to new suppliers during series production phase of a model. Up to now, only a few companies have been employing standard procedures to select appropriate best-cost sourcing regions. But this has to change if the goal shall be reached.

Strengthen competitiveness

In order to win the race against all its competitors globally, the Western European manufacturers should focus upon their purchasing departments. In the end, this is the only way to get the upper hand, especially with new emerging states entering the competition as well, they need to step up their game by winning a share of rapid market growth being generated. By taking this approach, manufacturers would be able to prevent material costs from getting out of hand. Alas, the companies would require financial room for conquering new, price-sensitive markets and to professionally get rid of the emerging competition in their home markets.

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