In 2012, AGCO stood at a crossroad. The agricultural equipment manufacturer faced stiff opposition from competitors, and knew that to extend its global reach, the company would need to transform the way it operated.
The key to this transformation was a reimagined supply management function. The former AGCO purchasing organization ran a decentralized, regional and brand-oriented procurement model that had proven sufficient for those needs. But to become the operating company management envisioned, AGCO knew it needed to establish a single, global procurement organization, based on a global commodity management approach and setup, a strategic procurement philosophy and the technology platforms necessary for a streamlined supply chain.
To enable this new function, AGCO partnered with SynerTrade, a global provider of a source-to-pay (S2P) suite spanning both strategic and operational requirements. The best-of-breed integrated application suite offers strong procurement products, but the provider also sits within a larger digital e-commerce organization Digital Dimension (Econocom Group), which helps provide an underlying set of flexible capabilities that can grow with AGCO’s changing needs, especially as procurement evolves within an increasingly digital supply chain.
SynerTrade fit the bill for several reasons. Spend Matters research indicates that from a functional and modular breadth perspective, SynerTrade ranks in the top dozen of procurement technology suites, and in specific modular areas, it has differentiated capabilities that have helped it stand out from competitors. SynerTrade also brings an intuitive user interface to the table — users can get to any application area they need in three clicks or fewer — which supported AGCO’s aim to maximize stakeholder engagement. Finally, SynerTrade’s strong reputation and experience in Europe complemented Duluth, Georgia-based AGCO’s global ambitions, giving the company the tools and experience it needed to support procurement efforts beyond North America.
To start, AGCO focused on improving its spend analysis and e-sourcing processes, beginning the project in North America with SynerTrade’s U.S.-based team. Essential to this effort was the early engagement of stakeholders, in order to give them ownership of the new technology and help standardize the new processes procurement sought to establish. From early stakeholder involvement, procurement then led the joint development of KPIs to measure success. These included increased cost savings, improved cycle times, reduced process costs, higher quote quality and better cost transparency and rigor (e.g., using total cost modeling and target costing).
Different stakeholders ultimately decided to use the new technology in different ways. Some moved into reverse auctions. Others used the platform in engineering and design processes, leveraging knowledge gained from analytics to inform sourcing strategies. Both cases have already advanced AGCO’s procurement group closer to its functional ideal, with the capability of tying procurement to contract, supplier and risk management processes undergoing simultaneous transformation efforts.
And while results are still early, the benefits of implementing SynerTrade are already clear to AGCO. Besides the realized purchase price reductions that were an obvious benefit, the manufacturer has identified promising process cost improvements, alongside similar improvements in cycle times and TCO metrics. The quality of quotes received by procurement, in particular, has improved significantly. Both of these improve the productivity of strategic procurement staff who can now be freed up to pursue increasingly strategic objectives.
But perhaps the most valuable result of implementing SynerTrade was the lessons learned. AGCO saw its technology partner as not only a tech enabler, but rather, an enabler of the procurement function globally. Guided by this mindset, AGCO and SynerTrade teamed up to improve the menu of supply services available both inside and beyond the company.
Engaging stakeholders such as engineering early was critical, because it proved instrumental to getting buy-in and achieving KPI goals with other functions. Looking outward, AGCO was also able to develop better relationships with suppliers by figuring out how to best coordinate them with AGCO’s new tools and processes.
The biggest takeaway of all? Procurement wished it had only started the project sooner. The benefits have been clear, and the opportunities for improvements are still numerous. The work is still far from done, but the end result of a completely transformed procurement function is far closer than it was just five years ago.
Want to dig into the full case study? Watch our recent webinar on-demand with Jan Theissen, strategy and methods director at AGCO, where he explains how procurement used e-sourcing as the tip of the spear in its supply chain transformation.