The Longtail Loses It's Horror
Procurement optimisation and reduction of suppliers in special machine construction
Every buyer knows the problem: In order to keep internal efforts in the procurement area under control, various options such as the standardisation of products, manufacturers, and ultimately suppliers are available. However, if the component selection is too severely reduced the specialist departments complain. The special machine builder ruhlamat has therefore, in partnership with itsme Schultz+Erbse, decided to go their own way.
With the unstoppable trend towards an increasingly automated production landscape there is an inevitable rise in complexity in the companies. The scope of performances of machines and systems is growing, additional sensors record status data and pass them on, communication modules connect machines to higher-level networks, while both operation and maintenance increasingly take place away from the plant. In some cases software, in combination with standardised and unified hardware, can offer a wide range of functions.
But software only solves part of the challenge. In many areas of machine and plant construction this way of dealing with complexity is not an option. The order of the day in special machine construction are customer-specific special solutions that can only be mapped with hardware. When considering adapting linear transfer systems, manual workstations, or test systems, this is only possible with the right interaction between hardware and software, as with ruhlamat GmbH from Marksuhl near Eisenach.
Standardised turnkey-complete solutions and systems for the medical and packaging industries, as well as machines for the personalisation of ID cards and passports are part of the company’s portfolio. However, it is precisely customers from the automobile and electronics industries who expect very specific solutions from Thüringen. The company really scores with them when it comes to special machines. While, for example in the packaging sector, batch sizes of 10 to 50 machines have been ordered, engineers and mechatronics engineers are developing assembly and automation systems for highly automated customer businesses tailored to each individual case. In this segment, no two identical machines leave the factory. Additional drivers of complexity include the special plant standards and supplier release lists of ruhlamat’s major customers. The aim is to ensure quality, availability, and delivery speed, or simply that the installed components originate from the group’s own portfolio.
ruhlamat is rated for special machine construction
In order to meet the individual production requirements ruhlamat has to operate at great expense. This applies in particular to the so-called Longtail, so to products, product groups, or manufacturers, who although they only have a single order item, or only a few, nevertheless have a considerable share of the operating expenses. After all, exotic products must also be technically planned and cleared with Procurement. And even suppliers who are seldom contacted, or even only once a year, must be created and cultivated. Or to express it according to the Pareto principle: It can be assumed that about 20% of the requirements are responsible for 80% of the effort. Therefore it is a crucial task, especially in procurement, to keep in check the rising costs in relation to increasing product individuality.
The other side of individuality
Long Tail, Long-tail, Longtail or Long runner
The term is representative of the usual result of a commercial ABC analysis for the clustered presentation of ordering positions per item. While the “top-turners” dominate as a block on the left side, the curve on the right side is increasingly characterised by a long-stretched tail.
C-parts optimisation as the first joint stepAfter the standardisation of the built-in components was deemed inadvisable in the bigger context, ruhlamat looked for other ways to optimise. Due to the increasing conversion of the theme-related use of the assembly facilities such as: OEM manufacturing, chip-card area, automotive and electric workshop to flexibility in favour of large projects, an adjustment of the stock levels was required anyway. The preferred idea was a lean process for C-parts, which are small parts, whose value lies between 8 and 12 euros, and that are often not listed to the exact unit in the parts lists. Undertaking this project using products of a single manufacturer, possibly with dozens of different supply partners, was rejected at an early stage. So a partner with the largest possible supply portfolio was required. “As a first step we looked at the parts lists, order frequencies, and supplier lists and realised very quickly that the supply portfolio of Schultz+Erbse covered nearly all of our 1,200 on-site storage needs”, buyer Enrico Dornack, entrusted with the project, describes the procedure. Following several rounds of talks the “on-site storage” process for permanent availability, which has been active since January 2016, was set up on the basis of, among other things, new shelves and bins and a KanBan card system and gets by without the need for withdrawal documents. Additionally, a streamlined procurement process: automatic order release, complete data comparison, no order confirmations, collective invoice, etc. ensures that the resources of the ruhlamat procurement are spared in favour of the acquisition of A and B parts.
After the successful realisation of the on-site storage project, the electro-technical and mechanical parts, approx. 1,500 A and B materials, were also tested for possible delivery through Schultz+Erbse. Larger manufacturer packages with a high demand volume of several items were successively checked and tested in blocks and, if appropriate, converted. At the same time, more and more sporadic demands, single items and special manufacturers found their way to common day-to-day business, the so-called “Longtail”. This has resulted in ruhlamat purchasing items from over 300 different manufacturers via itsme since the start of the partnership.
Clustering of purchased parts – from 300 make 1
A development that is very familiar to the team at the Leipzig branch of itsme, led by branch manager Mathias Pohlmann: “Such a development is quite typical for our customers, especially in the case of industrial end users or special machine constructors like ruhlamat. This is exactly where our strength lies: We combine the added value of technical advice with an extremely flexible procurement.” Michael Dietrich, Internal Sales person and entrusted with the support of ruhlamat from the beginning, adds: “Special requests are the order of the day. Our advantage is that we can be flexible in providing every part that is needed for customers like ruhlamat”.
Streamer: “Such a development is quite typical for our customers, especially in the case of industrial end users or special machine constructors like ruhlamat. This is exactly where our strength lies”
“Products below a threshold of €20,000 per year are now clustered at itsme. This offers several benefits for our operation,” explains Dornack. For example, colleagues now need to manage fewer order processes, check and process fewer delivery notes and invoices, and the relevant documents have been standardised. “A big advantage is also that we need to give less supplier care, and that the default risk of a purchase has been moved from us to itsme”, explains his colleague in procurement, Gloria-Helen Mann. She stresses that there is no need to give up on contact with the manufacturers during the process. “Our colleagues from the Planning and Development department continue to have first contact and can select the optimal components for our special machines and systems.”
Sometimes less is more
Dornack adds another positive conclusion: “itsme are increasingly involved early on in the ordering process. Here, their technical expertise and their significantly larger network help a lot. This is a win-win situation for all involved.” The close partnership is also evident from the numbers: The annual trading volume between ruhlamat and itsme has increased by a factor 15 between the years 2014 and 2018. The development of annual orders, from about 230 to 550 and order positions ,from about 1,500 to 8,800 in the same period also paints a clear picture.
Streamer: “Itsme are increasingly involved early on in the ordering process. Here, their technical know-how and their significantly larger network help a lot. This is a win-win situation for all involved.”