Toms make huge profits by pooling ingredient purchases
Toms Gruppen A/S have achieved significant savings in man-hours and budgets by pooling the purchase of 50 ingredients with one supplier. At the same time the group purchasing function can now focus on strategic sourcing.
With an annual production now including over 15,000 tonnes of chocolate, Toms are among the largest confectionery manufacturers, and in the nature of things, raw material consumption is enormous. The Purchasing Department experienced an excessive amount of time spent on peripheral ingredients and have therefore - through a so-called Single Sourcing Programme (SSP) - decided to group purchasing and logistical handling of 50 articles that make up a small part of the total volume.
- We are experts in buying the approx. 100 core commodities, which account for the vast majority of the budget. It includes eg cocoa beans, sugar, almonds and nuts. A disproportionate amount of time was spent on negotiations and other contacts with the 10 suppliers who provided us with the remaining 50 ingredients such as condensed milk and various additives. Therefore, we invited a handful of them to bid to take over the whole delivery, explains Andreas Hansen, Group Purchasing and Sourcing Manager at Toms.
Saves time and money
According to Andreas Hansen, three of the invited suppliers could offer all 50 products. After assessing these against each other the choice fell on Procudan A/S, who specialize in supply-chain management solutions for the Scandinavian food and pharma industry. - Our expectation was mainly to save time and thus free resources for tasks of greater economic importance and to save money to leave the purchase of peripheral products to others with more experience and volume. Both have proven successful, he states.
In addition, the purchasing manager emphasizes that it has resulted in time savings in daily operational procurement in the production to have just one supplier instead of ten, and it saves freight costs by getting products sent together from one central warehouse. - Here it suits fine that Procudan is physically represented in Denmark and Sweden, where the main part of our production takes place. Finally, it is important for the quality department that all quality and CSR documentation related to the 50 ingredients are consolidated in Procudan, says the Purchasing Manager.
Competitors as subcontractors
Only one thing has not been quite as expected. - We've had some unrealistic expectations of how many ingredients that could be substituted right away. In some cases, it has in practice been too expensive and difficult to get alternatives approved by our production and quality department, and we have since held on to the original suppliers. Here, however, it worked fine that the former suppliers have become subcontractors in Procudan, so we can do business with only one company, says Andreas Hansen.
In fact, the intensified collaboration with Toms Group has laid the foundation for a new business concept in Procudan. – Adding value to our customers' supply chains has for many years been Procudan's mission. The assignment with Toms showed that there can be significant gains for companies that dare to think out of the box. We therefore launched Procudan Single Point Sourcing, which is about providing resources and releasing the potential of our customers by leveraging synergies around for example purchasing, logistics and warehousing solutions, product optimization, risk management and, not least, quality assurance. We see great interest in this concept, says Market Director Morten K. Andreasen of Procudan. He points out that the customer retains overall responsibility for the products and tasks delegated, and the customer overview is ensured through technology and ongoing dialogue. - Solutions as the one implemented at Toms proves a huge potential to provide added value without taking business risks. More and more companies discover this, concludes the Market Director.
Toms Gruppen – with factories in Denmark, Sweden, Germany and Poland - has approx. 1,200 employees. The group, which has roots back to 1924,
manufactures a wide range of well-known brands, including Toms, Ga-Jol, Anthon Berg, Bon-Bon, Galle & Jessen, Penguin, Feodora and Hachez..www.toms.dk