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Supplier consolidation makes life easier

September 5, 2018

Working with many different suppliers can be both costly and immeasurable, Danish developer of printing presses Nilpeter knows all about that. By consolidating a vast amount of its purchases with one sourcing partner, Nilpeter has reduced its administration costs significantly and freed-up important resources.

Nilpeter manufactures presses for printing labels for large industrial companies such as Nestlé and Procter & Gamble. The presses are very complex and, thus, require a large number of custom-made components.

Today, Nilpeter spends six weeks on manufacturing a complete press – five years ago, it took three months. So, their current manufacturing process is much more sensitive to delays and delivery errors. Therefore, Nilpeter has replaced its outdated warehouse system with intensive data exchange and accurate deliveries from reliable suppliers, who operate digitally and carry the needed volumes.

”Being able to deliver reliable data has become a competitive parameter, and seen with Nilpeter’s eyes, Solar is currently leading that race,“ Group Purchasing Manager at Nilpeter Anders Liebst says.

With its long-standing collaboration with Solar, Nilpeter has been able to simplify its purchasing processes by continuously consolidating suppliers through Solar.

”It costs us about DKK 2,500 a year to nurture every single supplier. We have coffee meetings, renegotiate contracts, answer emails and a lot more. And when you have around 250 different suppliers like we do there is a lot of potential resource savings in consolidating,” Anders Liebst explains.

Add to that savings through simpler administration of orders, invoices, and inventory management, which also results from Solar’s EDI solution, which is connected to Nilpeter’s system.

”If we didn’t have Solar, we would need at least one extra full-time employee to handle purchasing, and it would be much more complicated and probably also less reliable,” Anders Liebst adds.

Bargaining power
The goal for Nilpeter was to reduce TCO (Total Cost of Ownership) – a practice in which Solar is an expert. Although Solar is not necessarily the cheapest supplier of all materials, a lot of money can be saved by letting a big player like Solar with a strong bargaining power handle a big part of the deliveries.

”In short, our work is all about making life as easy as possible for Nilpeter. We negotiate competitive prices and deliver the requested amount of materials on time, which means that Nilpeter can calmly focus on their core business,” says Lars Wandahl Sørensen, Vice President Industry & Offshore at Solar.

Since entering the EDI collaboration, Nilpeter has steadily phased out other small suppliers in order to let Solar take over the deliveries. According to Anders Liebst it is still their goal to consolidate the chain of suppliers as much as possible.

”We strive to consolidate the deliveries on even fewer hands, and hopefully, Solar will play an important role in this process,” Anders Liebst states.

Digitalisation is key
A couple of years ago, Anders Liebst made a big decision. He contacted 15 of his biggest suppliers and demanded that all administrative processes should take place digitally going forward, if the collaboration were to continue. Some managed to make the transition, while others threw in the towel.

This was the beginning of extensive digitalisation of administrative tasks and exchange of data with the suppliers – at the same time, it sped up the supplier consolidation with Solar at the centre.

”We do not have an IT department that can handle the digital part of the supply of materials. Thus, life becomes easier for us the closer our supply chain is connected to Solar’s digital system,” Anders Liebst says and adds: “More specifically, Nilpeter is connected to Solar’s EDI system, which ensures efficient exchange of data, e.g. invoices, increases data security, and minimises the risk of manual errors. Everything takes place via a cloud solution”.

If Nilpeter for example needs five units of a particular component, which can only be bought in boxes of 100, Nilpeter can have just the five delivered. In the meantime, Solar stores the other 95 components until Nilpeter needs more. In this way, Nilpeter will not have to store components they have no use for, which results in reduced stock value and less need for storage space.

The digitalisation of the supply chain has reduced Nilpeter’s inventory levels and administration costs, while at the same time vastly reducing the amount of delivery errors. Nilpeter’s KPI demand for Solar entails safety of delivery of at least 95 per cent. Since the start of the collaboration, it has constantly been between 97 and 100 per cent, which makes Solar Nilpeter’s supplier who most often delivers on time.

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