Procurement Categories
The strategic definition and management of procurement categories is a continuous challenge for procurement. We support you in optimising the use of resources and materials thus reducing procurement costs effectively. Together with you we apply commercial, structural and technical levers to existing and new suppliers. As a result, you can achieve significant savings both in direct and indirect procurement categories.
The starting point for optimisation of your procurement categories is our PARCO method. The abbreviation stands for Potential Assessment for Reliable Category Optimisation. PARCO is based on 12 levers that can be allocated to the What-Where-How dimensions.
PARCO
what
where
how
Simplification/Redesign-to-cost
- Reduction of complexity by eliminating over specification
- Redesign by means of function/value analyses to reduce identified cost drivers
- Application of industrial standards
Reduction of Variety
- Optimising number of variants in the procurement portfolio to achieve volume effects or reduce process costs and logistics expenditures
Demand Management
- Coordinating and monitoring existing demand as well as adapting processes to reduce or eliminate spend
Make or Buy
- Definition of core competencies
- Analysis of costs for internal or external performance of services in determining the optimal vertical range of production
Sourcing
- Increasing competition by identifying new suppliers
- Exploiting cost advantages through transfer to emerging procurement markets while taking into account total cost of ownership
Bundling
- Streamlining supplier portfolio
- Scale effects thanks to supplier coordination between several locations
Reallocation
- Strengths/weaknesses analysis of existing suppliers
- Reallocation of procurement volume within the supplier portfolio in order to exploit supplier strengths
Negotiation
- Calculation of target prices and application of proven open and structured negotiation methods for cost and market transparency on both sides
- Incorporating supplier substance to increase competition
Organisation and Processes
- Putting in place a redundancy-free organisation and lean processes as well as the implementing staff
- Introducing cross-functional teams to utilise skills/change management
Supply Chain Optimisation
- Adjustments throughout the value chain to implement a requirements-oriented material and automated information flow
- Reduction in transport and warehousing costs
- Stock Reduction
Supplier relations
- Cooperation with suppliers to achieve competitive advantages regarding quality, innovation, costs or time to market by means of supplier development or partnership/integration
Contract optimisation
- Reducing working capital by improving terms of payment
- Agreement on coordinated purchase quantity framework to achieve planning security
PARCO: Potential Assessment for Reliable Category Optimisation
Our Team has been successfully applying and continuously further developing the PARCO method within the framework of more than 300 cost optimisation projects since 1999. It enables identification of savings potential for each individual lever and each individual product group. To depict relevant areas in need of action in a clear and comprehensible fashion, we use a tool we developed ourself, the ARAIA Strategy Maker. More than ten areas of expertise describe the broad range of our services offered in connection with successful product group management. On request we would be glad to provide you with detailed information.
PARCO Cost Reduction Potential Analysis
Procurement Category Strategy
Direct Procurement Categories
Indirect Procurement Categories
Capital Goods
Procurement of Raw Materials
Make or Buy
Category Management
Global Sourcing
Hedging
ARAIA Areas of expertise
