Influence of purchasing in 
restructuring: Focus on savings

When it comes to restructuring, the first topics of discussion are often organization, structures, and capacities. In practice, however, it is often another area that determines whether a program will have a rapid impact: purchasing. Especially in crisis situations, purchasing often delivers the fastest, directly measurable effects on liquidity. In most companies, the costs that can be influenced by purchasing far exceed 50% of total costs. This makes purchasing one of the most effective levers when time and room for maneuver are limited.

A current project example at a globally active special-purpose machine manufacturer shows how quickly this lever takes effect.  The starting point was a significant deterioration in earnings over several periods. Further increases in material and personnel costs led to an earnings crisis.

When things get tight, responsiveness counts, not the perfect target image

Crises are rarely one-dimensional. Typically, multiple pressures arise simultaneously. Sales pressure, volatile supply chains, price increases, internal friction losses, and a supplier network that becomes more risk-sensitive in uncertain times. In this phase, it is not the organization that plans in the most detail that wins, but the one that acts quickly and stabilizes. This is precisely where purchasing becomes the hub between finance, operations, and suppliers.

In the project example mentioned above, the situation was characterized not only by cost increases, but also by a lack of coordination along the entire value chain. It is precisely these interface problems that accelerate the deterioration of earnings and cash flow in restructuring processes: when functions do not work cross-functionally and in a coordinated manner, inventories, throughput times, and special costs increase.

Typical starting point in purchasing:

Operational strength, but insufficient strategic focus.

Many purchasing organizations — especially in medium-sized companies — have historically been strongly operationally driven. Strategic elements such as consistent product group logic and strategies, robust supplier and risk management, or end-to-end spend transparency are often not available as needed. In addition, scarce resources make it difficult to establish sustainable and efficient routines and processes. In a restructuring situation, something very specific happens: valuable time is spent searching for data, coordinating meetings, and “clarifying responsibilities” instead of promptly realizing savings by creating competition and (re)negotiating.

Our health check also confirmed that transparency is a must-have for decision-making and control capabilities: Among other things, it laid the foundation for quick decisions through a structured P&L and cost driver analysis. In addition, a benchmark of component costs for selected components was created in order to prepare make-or-buy decisions based on facts. The findings were not only “approved” by management, but also validated on site with operational experts to ensure acceptance and feasibility on the shop floor.

Why purchasing is sometimes unable to 
exert its power in restructuring...

...and how to change this situation.

In turnaround situations, potential stumbling blocks are surprisingly similar: lack of data, too many coordination and approval loops, too much documentation and too little implementation. In addition, there are conflicting goals with specialist departments that slow down savings for reasons of risk or convenience (e.g., through de-specification). In addition, suppliers are often approached too cautiously, even though clarity and reliability are the basis for a stable supply chain and possible negotiations, especially in times of crisis.

In our project, therefore, implementation as a cross-functional performance improvement program rather than a pure “purchasing project” was a key success factor: In addition to short-term spend management and negotiations, technical and operational levers were addressed together with engineering and production. This included a pragmatic “good enough” approach in engineering, which consistently eliminates overengineering and non-customer-relevant features from the product. At the same time, quotation and calculation processes were set up in such a way that purchasing, engineering, sales, and operations could make decisions earlier and with greater certainty.

What really works in a turnaround: 

Mandate, data transparency, and implementation power.

Purchasing that is to be most effective, especially in restructuring, requires three things: a clear mandate, a reliable database, and sufficient will to implement. In addition, consistent tracking of measures is necessary so that effects are not merely “felt” but are transparently planned, realized, and followed up.

This is exactly how we structured our health check: in addition to analyzing cost drivers, we created a spend cube that shows suppliers, price developments, and volumes over time. This allowed us to define focus product groups, prioritize negotiations, and prepare for them in the best possible way. To support this, we designed a cash management mechanism to secure liquidity.

Identifying potential is the basis:

The rapid and consistent implementation of these measures is fundamental to the restructuring process.

In the project described, measures were not only identified but also implemented together with the customer. Personnel costs were reduced by more than 15%. Direct material costs were reduced by 7% thanks to a cross-functional task force led by the purchasing department. The task force conducted consistent negotiations, implemented de-specifications, and identified and enforced potential recourse claims with suppliers—a lever that is available in many organizations but is rarely used consistently.

Conclusion: Purchasing as a value driver and anchor of stability

In a turnaround, purchasing is much more than just a “cost center with negotiating power.” When managed correctly, it becomes a direct value driver: it stabilizes liquidity, improves earnings quality, reduces risks in the supplier network, and creates the basis for sustainable competitiveness. It is crucial that companies not only involve purchasing in the crisis, but also consistently empower it: with a mandate, data transparency, assertiveness, and an implementation model that makes the impact visible.

Horn & Company combines restructuring and purchasing expertise at precisely this interface: quick in diagnosis, pragmatic in implementation, consistent in tracking—and with proven application in recent projects in which cash and earnings leverage were realized together.