Many suppliers and service providers suffered an impact to their balance sheets as a result of the financial and economic crisis through a steep drop in orders right across the machinery and plant engineering sector. A key focus for Demag Cranes AG’s Group Purchasing was therefore to trim net working capital – primarily supplies and inventories – to match reduced order intake and to adjust capacity with our suppliers in a timely manner. Moreover, we also continually reviewed the credit standing of our suppliers, since a reduction in the supply of materials seriously impacted the financial situation of some suppliers. Our purchasing staff regularly asked our suppliers and service providers for information through “supplier screening” to help us identify developments at an early stage so that we could also take any necessary countermeasures in the short term. For instance, we quickly replaced a supplier of profile sections who had run into financial difficulties with another supplier. In this way, we have avoided any appreciable supplier failures and safeguarded the supply of material to all Demag Cranes factories.

The economic recovery that has begun in the meanwhile has led to an increase in orders in the machinery and plant engineering sector as well. Demag Cranes AG’s purchasing staff use “supplier screening” to precisely analyse supplier capacity for growth and to push forward additional measures to secure the supply of materials (e.g. finding second sources).

The Demag Cranes Group’s procurement strategies contribute substantially to safeguarding the Company’s competitive edge in the market and in terms of technology. Strategic purchasing activities and criteria for the global selection of suppliers thus continue to be aligned accordingly. We consider our main suppliers to be value-adding partners who not only reliably provide the Group with high-quality products and services, but who also give significant impetus to our product development. By sharing development and product optimisation, our main suppliers assist us in reducing manufacturing costs. This is key to safeguarding market share, particularly in times such as these. By continuously analysing processes along the supply chain, we are able to monitor manufacturing costs closely throughout the product-creation period together with our main suppliers, from the raw materials stage through to the final product.

Thanks to the increasing level of product standardisation, the Group is able to make greater use of economies of scale and enter into new types of relationships with our suppliers. In particular, flexible logistics agreements are becoming more important for ensuring timely delivery of material supplies and reducing tied-up capital. The Company’s global purchasing presence enables it to react flexibly to constantly changing market conditions and to systematically exploit local procurement advantages. In this regard, the focus is on the procurement markets in emerging countries, where we have our own purchasing offices in key locations.

In the reporting period, purchasing was converted from a segment-based purchasing structure into a central Group organisation. All Group purchasing employees of Demag Cranes AG have been concentrated in Düsseldorf since May 2010. All strategic purchasing units report direct to the Group’s Head of Purchasing, who in turn reports direct to the CFO of Demag Cranes AG. As a result of this centralisation, the main purchasing activities are now geared to generating economies of scale across groups of materials, implementing uniform supplier strategies and improving efficiency through the creation of uniform structures. In addition, procurement processes are being harmonised, and internationalisation and global sourcing are being increased further.

We systematically continued the international purchasing process with the second International Purchasing Meeting held in June 2010 by the Group’s Head of Purchasing and led by the CFO. At this meeting, the regional purchasing managers were informed about key Group purchasing initiatives and the activities required as a result were discussed and agreed. Additionally, information was continually exchanged with the regional purchasing managers in monthly teleconferences called “global calls”. Company-level specialisation in particular groups of materials is allowing us, firstly, to optimise technical cooperation with suppliers and, secondly, to further standardise and optimise our parts, components and systems. This is taking place through teamwork with other functions, particularly the engineering departments.

In the Industrial Cranes, Port Technology and Services segments, procurement processes for operations have largely been delegated to the individual business units or foreign locations. This organisational structure allows us to pool and manage demand centrally while maintaining sufficient flexibility to meet individual supply and service requirements throughout the organisation. The new structure gives us the flexibility we need to meet the changing requirements of a cyclical market.

Overall, the Demag Cranes Group works actively with some 210 A-list suppliers in the Industrial Cranes, Port Technology and Services segments. This is the result of continuous strategic efforts to reduce our supplier base. At the same time, we have – to date successfully – ensured that the Group does not become too dependent on individual suppliers.

In the financial year, expenses for supplies and services amounted to approximately EUR 437 million (previous year: approximately EUR 499 million), of which some EUR 327 million (previous year: around EUR 366 million) was spent on materials.