Siemens works to achieve cost savings in supply chain

on Monday, December 17, 2012

Siemens works to achieve cost savings in supply chainEngineering and electronics giant Siemens recently unveiled plans to increase its supply chain efficiency, and the plan aims to save the company €3 billion in operational expenses by 2014. The corporation has developed a strategy that will work on its supply chain management, alter procurement tactics and implement green technology.

In 2008, the corporation first implemented a company-wide supply chain management system under the leadership of Barbara Kux. Since that time, the company has managed to change up some of its strategies, but it plans to work even harder to ensure its operations are working together to achieve maximum savings. With Kux's recent announcement that she will leave the organization when her contract expires in December, there are questions as to how the company's supply chain savings program will continue and remain successful.

"The €3 billion target is only possible because of what I have set up in the last four years," she told the Financial Times. "I'm very confident, I know exactly what can be done … I can tell you that the €3 billion will be delivered. We are set up to achieve that."

Procurement strategies changing
Part of Siemen's cost cutting strategy involves altering current procurement practices. The company revealed that while less than 30 percent of its purchasing was aggregated in 2008, that number has shot up to 55 percent, slashing expenses.

Where the company sources from is as important as its procurement strategies. Siemens revealed that it has stepped up its purchasing from emerging countries. While it acquired 20 percent of its volume from these countries in 2008, that number has jumped to 26 percent.

Other plans to save
The company isn't only focusing on procurement and sourcing strategies - it is also looking into ways to save on product development. This "design-to-cost" method being considered would increase the partnership between the supply chain management and product development teams and ensure products are developed in the least expensive manner possible.

Also important to Siemens' goal of saving €3 billion in supply chain operations is the further integration of the supply chain management function into all of the company's operations. The supply chain management team would work with each of the organization's sectors to determine how additional savings could be achieved.

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