Abstract
LEO is a French automotive equipment manufacturer, with 150 production... Show full details and related products Abstract:LEO is a French automotive equipment manufacturer, with 150 production sites in 30 countries around the world at the end of 2008. Since 2009, the automobile industry has been suffering from the financial crisis. LEO was seriously affected by the recession in Europe and the unprecedented volatility of commodity prices. The CEO decided to reorganize the structure in order to have saving in cost and adapt to the more demanding environment. LEO decided to establish a centralized procurement department in headquarters to plan and manage the entire purchasing activities for all production sites. Local purchasing departments were dismissed. The new procurement team was segmented by commodity, and a Commodity Management Team (CMT) was set up in order to hedge the commodity risk in the financial market. At the same time, LEO decided to reduce suppliers by 20% per year, and tried to increase the proportion of low cost countries sourcing from 60% to 80% in 2 years. After the reorganization, some new problems emerged in the newly centralized procurement department: coordination deteriorated between departments; quality and logistic issues became problematic due to Low Cost Countries Sourcing; and relationships with suppliers were hurt during the implementation of the centralized procurement structure. In this case, we try to discuss how to establish a procurement strategy to strengthen a company’s competitive advantages, and to show the importance of supplier relationship management.