Case study – Gestamp Automotive: International reorganization of the sourcing function

Learn how GESTAMP; Spain's largest automotive supplier with turnover of above 4.4 billion euros, implemented and deployed a new global sourcing and procurement model and organization supported by top of the line procurement processes and systems that cover 100% of their purchasing scope; including both direct and indirect materials and services.

How FULLSTEP has helped Gestamp adapt its sourcing organization to its sustained growth

Gestamp decides on an innovative model to manage 100% of the purchasing scope

Gestamp Automotive is one of the largest manufacturers of metal components and kits for vehicles in the world, with presence in 21 countries, >70 production plants, 13 R&D facilities and over 18,000 employees. The turnover in 2010 was 4.4 billion Dollars.

Due to the growth experienced by the Group in recent years, Gestamp decided to carry out a project to optimize its global sourcing and procurement organization. The biggest challenge was to implement a purchasing model at a global level in which more than 150 buyers from different countries would share the same strategies, methodologies, organization and systems.

Analyzing the Organization and Spend

In order to carry out such an ambitious project, Gestamp employed the services of FULLSTEP, which jointly with the designated team from Gestamp embarked on the design of the new model to be deployed.

During the initial phase of the project, FULLSTEP's team proceeded with the assessment of Gestamp's existing sourcing organization, together with the spend analysis per plant, country, and region, then consolidating at group level. Spend categories were defined, volumes allocated, and overall complexity and improvement potential estimated.

Following the initial evaluation phase, important organizational improvements and changes were implemented in Gestamp, including:

• Implementation of an advanced matrix organizational structure to adequately comply with both local and global needs. The purchasing department was transformed into a corporate unit organized around purchasing categories (commodities) and geographical locations. Purchasing strategies were set at corporate level by Commodity Managers. Local Purchasing managers were brought in to discuss and adapt the strategies proposed and to assume the responsibility of local implementation.
• Creation of a Purchasing Committee to manage the Group's purchasing decision process as one of the pillars of the new Global Procurement function. Teamwork-based procedure, with the participation of users, managers and purchasing team members, which ensures the transparency and objectivity of decision making by consensus as well as helping encourage collaboration.
• Development of a new company wide single purchasing process based on:
• Achievement of Synergies: the Purchasing Process was chosen to be the tool to identify, execute and achieve Group synergies.
• Separation of functions: differentiate Buyer from Procurer and User from Buyer. Negotiations carried out by specialized buyers. The rest of the functions and roles within the purchasing process are clearly defined and split in each of the company's departments.
• Anticipation: involvement and intervention of the purchasing areas from beginning to end of the purchasing process.
• Agile: execution without delays that would interfere in the daily operations of plants.
• Monitoring of targets and indicators: establishment of clear and concise guidelines used to measure the performance of the purchasing function.
• Implementation of specialized sourcing and procurement systems for purchasing management: this ensures the implementation of the model standardizes processes and shares purchasing information on a global level. All the Group's purchasing teams use the same sourcing software, developed by FULLSTEP, which integrates with the different corporate ERPs systems deployed in the Group.

Strategic Sourcing

The first phase involved the implementation of the new model, organization and processes. FULLSTEP worked hand in hand with Gestamp's newly formed procurement team to launch and execute the approved negotiation plan, through the Strategic Sourcing best practices recommended by FULLSTEP.

Besides the work necessary to gather specifications, analyze supply markets and evaluate potential suppliers, one crucial step was to launch a recurring Purchasing Committee, a weekly meeting involving all procurement stakeholders and that would validate the decisions made to source strategic materials or services.

The implementation was supported by the deployment of the FULLSTEP Global Sourcing & Supplier Portal modules.

The negotiation plan was initiated after 6 months, FULLSTEP's staff working with GESTAMP's corporate buyers for the negotiation processes through the new model and tool. After 12 months, 60% of the purchasing volume had been negotiated, every process approved by the Purchasing Committee, and savings up to 16% were achieved.

Procure-to-Pay

In order to increase control over spend and ensure the efficiency of the sourcing optimization at Gestamp, in the early phases of the project we begun designing a complete Procure to Pay solution.

We developed a model to manage purchase approval workflows, previously to the negotiation process by the sourcing department. Every purchase order or purchase requisition had to be approved within the organization before the sourcing department would initiate the sourcing process. To handle this process we implemented FULLSTEP PM. It is a web-based tool allowing requisitioners and managers to electronically create, approve, monitor and manage purchasing requisitions, with specific workflows by business unit, departments, plants, etc…

At the other end of the sourcing process, we designed and developed integration interphases between the FULLSTEP Platform and Gestamp's ERP systems. More than 10 different ERPs were deployed in the Group at the time, and all were integrated to the one FULLSTEP Platform deployed by the Group, to ensure that all conditions negotiated by the sourcing department would be always applied for the release of purchase orders, receipt of goods or services, and ultimately their payment.

Integrated Platform: All the applications are fully integrated with the different ERP systems and Group's back-end systems: two different SAP R/3's, an AS400 and six different MOVEX, DATASUL and MAPICS systems.

Today, 90% of GESTAMP's spend is electronically managed and approved through FULLSTEP's system.

Supply Base Management

The next step was then to improve monitoring of the quality of goods, services acquired, and ultimately of the suppliers working for the organization. The Supply Base Management's phase of the project relied on the FULLSTEP Platform Quality Module (FULLSTEP Quality Assurance) in order to standardize the quality criteria across all of the Group's plants. The Quality Module ensures that all suppliers comply with GESTAMP's quality requirements, improves the supplier service agreement monitoring and highlights the costs of substandard quality. Through electronic Certification forms and Non-conformity management, Gestamp's Supplier's Score Card helps identify valuable suppliers as well as the cost of poorly performing suppliers to the organization.

Contract Lifecycle Management

At Gestamp, over four years into the sourcing transformation project, commodity managers and specialized buyers are continuously optimizing the contracting conditions, permanently revising specifications and tightening the definition of service level agreements.

All this is helping to implement a proactive attitude towards Contract lifecycle management which is supported by the suppliers' quality tracking tools that have been deployed and permanently monitor suppliers' performance.

Successful cooperation

Today, the full scope of sourcing at Gestamp is under direct control of the Corporate Sourcing Director, in close cooperation with all stakeholders involved in the decision making process.

The sourcing department is staffed by specialist buyers, experts in their areas, and the system environment ensures all the savings negotiated will arrive to the bottom line. All the work done by the sourcing area and their collaborators is electronically traceable and fully integrated across functional areas, so no time or effort is spent on miscommunication and double data entry.

Gestamp's sourcing area has become a strong value generator for the Group, through rationalization and optimization of all the components of the procurement organization, and the implementation of tools and processes which enable management of the entire cycle, with continuous monitoring, evaluation and improvement.

Newly acquired companies or green field plants are swiftly included in Gestamp's optimized sourcing and procurement model.