Yesterday, I had the opportunity to have a lengthy conversation with the CPO of a global machine tool manufacturer. When asked what his fellow CEO expected of him, the answer was, „Our purchasing needs to become more technical – just negotiating alone is not enough anymore.“

Negotiating well alone is no longer enough

For me personally, purchasing is one of the most important levers for a sustainable competitive advantage: a company can only be world-class if purchasing also operates at a world-class level.

Traditionally, however, many purchasing departments in finance are organized under a CFO and have a strong focus on negotiations. Increasingly, however, procurement reports to the CEO (in most Fortune 500 companies, the CPO reports to the CEO) and the CEO has other priorities besides excellent negotiation success: Purchasing must become a key partner to the business units and engineers.

In the past, this led to an expansion of „cost-value engineering“ or CVE departments for short. An experienced CVE expert knows the suppliers and their production technologies and he calculates in detail the manufacturing costs of a part based on the production steps. These technical cost structure analyses are often very helpful for negotiations.

But is that enough to make a purchase „more technical“ today? How do you teach a (young) buyer which technical tender parameters influence his product group and how much these parameters determine the material price? The answer is already in the question: A good technical buyer needs an excellent knowledge of the relevant tender parameters. He does not need to be a production expert, because he only specifies commercial and technical parameters, and each supplier performs this service differently in detail than his competitors.

A world-class buyer helps engineers specify in a more cost-oriented way
Increasingly, companies are recognizing the added value that good data can provide in this regard: When you have a clear overview of the technical specifications of a product group, buyers AND engineers can not only negotiate better but also specify better! And companies that specify better can also standardize better and design global component platforms.

Digitization can help purchasing to become more „technical“ and a solid analysis of tender parameters for purchased parts enables unmatched cost reduction opportunities that go far beyond „better negotiation“.

COVALYZE is the first solution on the market that optimally supports this process in all phases and helps global companies to sustainably reduce their material costs. Our claim is that world-class purchasing departments use COVALYZE for this purpose!