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Focus: Sourcing/Procurement

Feature Article from Our Sourcing and Procurement Subject Area - See All

From SCDigest's On-Target e-Magazine

- Dec. 5, 2012 -

Supply Chain News: Global Industrial Giant Siemens Says Procurement Improvements Driving Billions (with a B) to the Bottom Line


Supply Chain Chief Barbara Kux Making Good on her 60-25-20 Plan


SDigest Editorial Staff 


As part of its Siemens 2014 improvement, German industrial giant Siemens announced this week it was counting on its procurement and supply management group to carry a large portion of the load to drive billions of dollars out of its supply chain.

SCDigest Says:


Kux said that to realize cost improvements, "We can't just intensify cost pressure on our suppliers. We have to focus on the entire supplier-to-customer value chain."

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Leading that charge is Barbara Kux, named head of Siemens global supply chain in 2008, who now also holds the title of chief sustainability officer. That move was the first time in Siemens history one executive at the company held full global supply chain responsibility across the enterprise.

In its press release, Siemens said it has seen many improvements in its supply management function already.

For example, today 55% of the company's total procurement volume is bundled, meaning aggregated on a global basis. In 2008, the figure was slightly less than 30%.

Emerging countries now account for 26% of Siemens' procurement volume, compared to 20% in 2008.

The company also said that between 2009 and 2012, the accumulated contributions to profit attributable to supply chain management were in the upper single -digit-billion euro range (in other words $8 billion or so).

As part of its 2014 plan, there will be a focused effort to better integrate supply chain processes with the business, Siemens says, and here again supply management will play a leading role.

For example, Kux will lead an effort to better integrate procurement and Siemens product development processes by using the "design-to-cost" method.

Through use of this more integrated approach to supply chain, Siemens hopes to achieve a contribution to profit of at least 3 billion euros in both 2013 and 2014.

Interestingly, after Kux is finished establishing the supply chain improvements and integrated processes into the companies for main business sector groups, she will actually leave the company.

(Sourcing and Procurement Article Continues Below)



In an interview for a Siemens publication not long after she joined the company, Kux said that to realize cost improvements, "We can't just intensify cost pressure on our suppliers. We have to focus on the entire supplier-to-customer value chain."

She said Siemens would adopt a 60-25-20 approach. This means 60% of Siemens total procurement volume would be centrally pooled by 2010, the proportion of goods that it purchases in emerging countries would rise from 20 to 25% in the medium term, and that the company would also reduce the number of suppliers it has by 20% in the medium term. The company is up to 55% globally procured goods and has exceeding the emerging market sourcing goal already, as noted above.

Kux also stressed the need for advanced thinking and collaboration in supply management.

"This isn't an us-versus-them process. We want to grow hand-in-hand with our suppliers," she said. "We also want to improve our products and solutions even further and get our offerings to the market faster and more economically. It's only through cooperation that we'll be able to reach these goals and make a major contribution to Siemens’ further sustainable development."

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