{"id":89646,"date":"2019-07-07T14:39:31","date_gmt":"2019-07-07T12:39:31","guid":{"rendered":"https:\/\/www.KGM Strategy.com\/?p=89646"},"modified":"2024-12-09T16:44:27","modified_gmt":"2024-12-09T15:44:27","slug":"smi-01-cover-story","status":"publish","type":"post","link":"https:\/\/www.KGM Strategy.com\/en\/insights\/smi-01\/","title":{"rendered":"SMI 01 | Cover Story"},"content":{"rendered":"<div class=\"anchor-navigation \" style=\"background: #a0d60a; color: rgb(0,0,0);\" data-sticky=\"false\">\n    <ul class=\"list-unstyled\"><\/ul>\n<\/div>\n\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\"><p>&nbsp;<\/p>\n<p class=\"mt-lg-2\" style=\"font-size: 45px;\"><span style=\"color: #282828;\">Lost in the Bermuda Triangle<\/span><\/p><\/div><\/div><\/div>\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-1\"><\/div><div class=\"col-lg-11\"><div class='container  py-3'><\/div><div class=\"row \"><\/div><div class=\"col-lg-1\"><\/div><\/div><div class=\"col-lg-11\"><p><span style=\"color: #67c1b5;\"><strong>Companies often miss budget and specification deadlines when procuring capital goods. Integrating procurement in planning and organization early on can make it possible to meet these goals, and also, to beat them.<\/strong><\/span><\/p><\/div><\/div><\/div>\n<p><div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\"><p>On December 5, 1945, shortly after the end of the war, five fully-fueled US Air Force torpedo bombers set off from South Florida on a training flight. Not one of the aircraft returned to the Fort Lauderdale base. The subsequent search by air and sea was in vain. Flight 19 is now considered to be the beginning of the so-called Bermuda Triangle, and numerous myths surround other similar mysterious disappearances of ships and airplanes in the region.<\/p>\n<p>Today, we sometimes get the impression that a new Bermuda Triangle has emerged in business. Generally, though, it is not ships or airplanes that disappear, but cash, capital and other assets. Notable examples are the Berlin-Brandenburg Airport, Stuttgart 21, and the Elbe Philharmonic Hall. It is not only major public projects that are affected by the phenomenon of such a remarkable waste of money, time and again, private business has problems with investment projects. This is because, in many companies, particularly mid-sized companies, CAPEX, as opposed to OPEX, is not professionally managed, to the considerable detriment of anticipated profit and operating results.<\/p>\n<p>&nbsp;<\/p>\n<div class=\"icon-boxes  \" data-moduleID=\"67848\" is=\"summary-box\">\n    <div class=\"summary-box-padding overflow-visible\">\n        <div class=\"icon-box has-icon  fadeIn\" style=\"border-color: rgb(103, 193, 181);\" data-animated-icon=\"true\">\n            \n                <div class=\"icon\">\n                    <div class=\"inner\">\n\n                                                                                    <svg id=\"animatedIcon-50ec8f0e0f092c6d14e1621a0b300d3a\" data-id=\"50ec8f0e0f092c6d14e1621a0b300d3a\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" xmlns:xlink=\"http:\/\/www.w3.org\/1999\/xlink\" x=\"0px\" y=\"0px\" viewBox=\"0 0 120 120\" xml:space=\"preserve\" width=\"75\" height=\"75\">\n                                    <path fill=\"none\" stroke-width=\"20\" stroke-miterlimit=\"10\" stroke=\"#a0d60a\" class=\"st0\" d=\"M36.7,40.1c0-9.9,7.6-20.7,17.6-22.7c0,0,14.5-5.6,27.1,7.3c4.4,4.5,6.2,11.1,5.5,17.3C86,49,81.9,54.7,76.9,59.3C76,60.2,75,61,74,61.8c-3.4,2.7-7.7,4.6-10.3,8.2c-3.3,4.6-2.4,10.7-2.4,16v1.2\"\/>\n                                    <line fill=\"none\" stroke-width=\"20\" stroke-miterlimit=\"10\" stroke=\"#a0d60a\"  class=\"st0\" x1=\"61.2\" y1=\"94.3\" x2=\"61.2\" y2=\"109.5\"\/>\n                                <\/svg>\n                            \n                        \n                    <\/div>\n                <\/div>\n\n            \n                            <div is=\"accordion\">\n                    <div class=\"accordion-item\">\n                        <div class=\"accordion-header\" id=\"heading-50ec8f0e0f092c6d14e1621a0b300d3a\">\n                            <button class=\"accordion-button collapsed\" type=\"button\" data-bs-toggle=\"collapse\" data-bs-target=\"#collapse-50ec8f0e0f092c6d14e1621a0b300d3a\" aria-expanded=\"false\" aria-controls=\"collapse-50ec8f0e0f092c6d14e1621a0b300d3a\">\n                                <span class=\"accordion-button-label\">\n                                    <span>What is the difference between CAPEX, OPEX, and TOTEX?<\/span>\n                                <\/span>\n                            <\/button>\n                        <\/div>\n                        <div id=\"collapse-50ec8f0e0f092c6d14e1621a0b300d3a\" class=\"accordion-collapse collapse\" aria-labelledby=\"heading-50ec8f0e0f092c6d14e1621a0b300d3a\">\n                            <div class=\"accordion-body\">\n                                <p>CAPEX includes all capital expenditure within the company. In accounting terms, it is treated as fixed assets and is subject to tax depreciation allowances over a period of time. OPEX refers to business operating expenses. The term TOTEX represents the total expenditure of a business.<\/p>\n<p><strong>TOTEX = CAPEX + OPEX.<\/strong><\/p>\n\n                            <\/div>\n                        <\/div>\n                    <\/div>\n                <\/div>\n\n            \n        <\/div>\n    <\/div>\n<\/div>\n\n\n<p>&nbsp;<\/p>\n<h2>CAPEX Expenditure Rising Steadily<\/h2>\n<p>Capital expenditures (CAPEX) continue to represent one of the most significant financial commitments for companies worldwide, reflecting the ongoing evolution of industries and their strategic responses to technological advancements, sustainability goals, and market demands. In capital-intensive industries, CAPEX remains a critical lever for competitiveness and growth.<\/p>\n<p>For example, the global energy sector recorded investments of $499 billion in renewable energy in 2022, marking a 16% increase compared to the previous year, as companies accelerate their transitions to cleaner energy sources. Similarly, the telecommunications industry saw its total CAPEX rise by 4.2% to $319.1 billion in 2022, largely driven by the ongoing global rollout of 5G infrastructure. These sectors exemplify how CAPEX serves as a fundamental driver for enabling advancements that align with societal needs and market trends.<\/p>\n<h3><span style=\"color: #004146;\">Since CAPEX requirements occur in many product groups, their characteristics and complexities are very different. CAPEX expenditure is divided into three categories:\u00a0<\/span><\/h3>\n    <div class=\"container py-3\">\n        <div class=\"row\">\n                            <ol class=\"process-list-leading-numbers\" style=\"background-color:#ffffff;\">\n                    \n                                            <li class=\"animate-inview\" style=\"border-color: #daedea;color: #a0d60a;\">\n                            <div style=\"color:#282828;\">\n                                <p><strong>Day-to-Day\u00a0CAPEX<\/strong><\/p>\n<p>Ongoing, day-to-day CAPEX for business operating expenses. Examples include IT (e.g. a server or high-cost software system), logistics and marketing<\/p>\n\n                            <\/div>\n                        <\/li>\n                                            <li class=\"\" style=\"border-color: #daedea;color: #a0d60a;\">\n                            <div style=\"color:#282828;\">\n                                <p><strong>Large, recurring CAPEX<\/strong><\/p>\n<p>This includes investment in machinery in industry, or store fittings in retail<\/p>\n\n                            <\/div>\n                        <\/li>\n                                            <li class=\"\" style=\"border-color: #daedea;color: #a0d60a;\">\n                            <div style=\"color:#282828;\">\n                                <p><strong>CAPEX projects<\/strong><\/p>\n<p>One-off CAPEX investment in buildings or plant construction<\/p>\n\n                            <\/div>\n                        <\/li>\n                                                    <\/ol>\n                    <\/div>\n    <\/div>\n\n    <div class=\"container py-4 quote-section type-minimalistic-text  \">\n        <div class=\"row\">\n            <div class=\"col-md-8 text\">\n                                    <div class=\"text-container\">\n                        <h3>The CAPEX Phenomenon<\/h3>\n<p>It is striking that OPEX procurement has achieved a high degree of maturity in recent years and is often structured in a very professional way. Expenditure on CAPEX requirements, though, is often only managed superficially in terms of procurement. This may result in companies negotiating intensively for OPEX requirements, while sometimes giving away millions on CAPEX. You could even dare say that the price of every paper clip is haggled over, while the responsibilities of procurement e.g. when determining complex requirements such as buildings, machinery, or IT systems, rarely extend to using total cost of ownership (TCO).<\/p>\n<p>We are frequently seeing that the more complex the CAPEX requirement is, the less procurement is involved. However, even with demanding investment projects, price and performance transparency is just as indispensable as scrutinizing specifications.<\/p>\n<p>\n                        <div class=\"text-collapsed\">\n                            <\/p>\n<p>While OPEX buyers frequently control the whole process, procurement is often called in at a late stage in large, recurring CAPEX requirements and projects \u2013 sometimes only for the final negotiations. Procurement cannot pursue its strategy because it is involved so late, meaning huge opportunities are lost. Moreover, while requirements and expenditure risks rise with complexity, procurement could cushion against this by taking effective measures.<\/p>\n\n                        <\/div>\n                    <\/div>\n                    <button class=\"btn btn-link text-decoration-none text-uppercase float-none\">\n                        <i class=\"icon icon-plus-rounded fs-65 lh-0 mt-n2 me-2\"><\/i>\n                        Read more\n                    <\/button>\n                            <\/div>\n            <div class=\"col-md-4\">\n                <div class=\"quote fadeIn\">\n                    <i class=\"icon icon-quote fs-1\"><\/i>\n                    <div class=\"text\" style=\"color: #004d91\">\n                        <p>Provocatively said, the price of every paper clip is haggled over, while the skills of the procurement department are rarely used for complex requirements.<\/p>\n\n                    <\/div>\n                <\/div>\n            <\/div>\n        <\/div>\n    <\/div>\n\n<div is=\"tab-content\">\n    <div class=\"tabs responsive-tabs container is-style-leading_check overflow-visible\">\n        <div class=\"row \">\n            <div class=\"col-lg-4 navContainer\">\n                <ul class=\"nav nav-tabs-02\" role=\"tablist\">\n                                            <li class=\"nav-item\" role=\"presentation\">\n                                                            <div class=\"bg-circle \"\n                                                                                style=\"background-color: #f39100\"\n                                                                    >\n                                                                            <i class=\"icon icon-check\"><\/i>\n                                                                    <\/div>\n                                                        <button class=\"trigger-button active\" id=\"btn-tab-1-0\" data-bs-toggle=\"tab\" data-bs-target=\"#tab-1-0\" type=\"button\" role=\"tab\" aria-selected=\"true\">\n                                <span class=\"trigger-button-title\">CAPEX purchasing risks vs. Maturity of procurement<\/span>\n                            <\/button>\n                        <\/li>\n                                            <li class=\"nav-item\" role=\"presentation\">\n                                                            <div class=\"bg-circle \"\n                                                                                style=\"background-color: #f39100\"\n                                                                    >\n                                                                            <i class=\"icon icon-check\"><\/i>\n                                                                    <\/div>\n                                                        <button class=\"trigger-button\" id=\"btn-tab-1-1\" data-bs-toggle=\"tab\" data-bs-target=\"#tab-1-1\" type=\"button\" role=\"tab\" aria-selected=\"true\">\n                                <span class=\"trigger-button-title\">Procurement Maturity<\/span>\n                            <\/button>\n                        <\/li>\n                                    <\/ul>\n            <\/div>\n            <div class=\"col-lg-8 col-xl-7\">\n                <div id=\"tab-1--tabContent\" class=\"tab-content tab-content-type-02\" role=\"tablist\">\n                                            <div class=\"tab-pane fade card show active\" id=\"tab-1-0\" role=\"tabpanel\" aria-labelledby=\"btn-tab-1-0\">\n                            <div class=\"card-header\" role=\"tab\" id=\"heading-tab-1-0\">\n                                <button class=\"trigger-button trigger-button--icon\" type=\"button\" data-bs-toggle=\"collapse\" data-bs-target=\"#collapse-tab-1-0\" aria-controls=\"collapse-tab-1-0\" aria-expanded=\"true\">\n                                                                            <div class=\"bg-circle \"\n                                                                                                style=\"background-color: #f39100\"\n                                                                                        >\n                                                                                            <i class=\"icon icon-check\"><\/i>\n                                                                                    <\/div>\n                                                                        <span class=\"trigger-button-title\">CAPEX purchasing risks vs. Maturity of procurement<\/span>\n                                    <i class=\"icon icon-arrow-right\"><\/i>\n                                <\/button>\n                            <\/div>\n                            <div id=\"collapse-tab-1-0\" class=\"collapse show\" data-bs-parent=\"#tab-1--tabContent\" role=\"tabpanel\" aria-labelledby=\"heading-tab-1-0\">\n                                <div class=\"card-body\">\n                                    <div class=\"inner\">\n                                    \n                                                                            <h4><strong>Significant risk overhang in the recurring and project CAPEX areas<\/strong><\/h4>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-67869 size-full\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-purchasing-diagram.png\" alt=\"\" width=\"822\" height=\"401\" srcset=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-purchasing-diagram.png 822w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-purchasing-diagram-800x390.png 800w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-purchasing-diagram-768x375.png 768w\" sizes=\"auto, (max-width: 822px) 100vw, 822px\" \/><\/p>\n\n                                                                        <\/div>\n                                <\/div>\n                            <\/div>\n                        <\/div>\n                                            <div class=\"tab-pane fade card \" id=\"tab-1-1\" role=\"tabpanel\" aria-labelledby=\"btn-tab-1-1\">\n                            <div class=\"card-header\" role=\"tab\" id=\"heading-tab-1-1\">\n                                <button class=\"trigger-button trigger-button--icon\" type=\"button\" data-bs-toggle=\"collapse\" data-bs-target=\"#collapse-tab-1-1\" aria-controls=\"collapse-tab-1-1\" aria-expanded=\"false\">\n                                                                            <div class=\"bg-circle \"\n                                                                                                style=\"background-color: #f39100\"\n                                                                                        >\n                                                                                            <i class=\"icon icon-check\"><\/i>\n                                                                                    <\/div>\n                                                                        <span class=\"trigger-button-title\">Procurement Maturity<\/span>\n                                    <i class=\"icon icon-arrow-right\"><\/i>\n                                <\/button>\n                            <\/div>\n                            <div id=\"collapse-tab-1-1\" class=\"collapse\" data-bs-parent=\"#tab-1--tabContent\" role=\"tabpanel\" aria-labelledby=\"heading-tab-1-1\">\n                                <div class=\"card-body\">\n                                    <div class=\"inner\">\n                                    \n                                                                            <h4><strong>Common KPIs show that, in general, CAPEX procurement maturity decreases as spend and complexity increases<\/strong><\/h4>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-67866 size-full\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-maturity.png\" alt=\"\" width=\"891\" height=\"503\" srcset=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-maturity.png 891w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-maturity-800x452.png 800w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-maturity-768x434.png 768w\" sizes=\"auto, (max-width: 891px) 100vw, 891px\" \/><\/p>\n\n                                                                        <\/div>\n                                <\/div>\n                            <\/div>\n                        <\/div>\n                                    <\/div>\n            <\/div>\n        <\/div>\n    <\/div>\n<\/div>\n\n<div id=\"challenges\" class=\"anchor\" data-name=\"Challenges\"><\/div><\/div><\/div><\/div><div class='container  py-3'><div class=\"row \"><div class=\"col-lg-6\"><p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-68246 size-medium\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/07\/capex-alternative-svg-800x443.png\" alt=\"\" width=\"800\" height=\"443\" \/><\/p><\/div><div class=\"col-lg-6\"><h3>CAPEX Procurement Challenges<\/h3>\n<p>CAPEX requirements are often not as standard as OPEX requirements due to their complexity and rarity. Even recurring investments and projects are only procured irregularly, so there are no standardized procedures. Depending on the project structure, the roles of the project partners also vary.<\/p>\n<p>Company interfaces, complex technical specifications, and interdependencies require close, early cooperation with engineering, key project partners, and core suppliers.<\/p>\n<p>&nbsp;<\/p><\/div><\/div><\/div><div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\"><p>Due to the high level of investment, decisions on CAPEX requirements in mid-sized companies are often initiated by senior management. Because of its \u201cexceptional character\u201d, otherwise customary forms of involving departments and procurement are not sufficient, or specialist expertise is not called upon until it is already too late to make key changes to the requirements. Moreover, in investment procurement, companies often do not think in overarching terms of projects and locations, so they do not benefit from the considerable potential of standardization and bundling.<\/p>\n<h3>Transparency: the Key to Success<\/h3>\n<p>By way of example, a vending machine service company outsourced its equipment procurement to local management teams. This meant there were considerable differences across locations in terms of the number and type of vending machines. By analyzing which functionalities were actually needed and which machines were used the most, procurement first gained a overview of all sites. Considerable savings could then be achieved through standardization and bundled procurement.<\/p>\n<p>CAPEX investments often involve large budgets, a long-term timescale, tight timings for the individual phases, and the commitment of different resources. There is a conflicting relationship here between time, costs, quality, and project scope. Within this relationship, the major challenge is keeping within budget and time constraints. Optimal solutions call for intensive and efficient coordination and cross-functional teamwork. Closely involving procurement at all stages of CAPEX projects is indispensable.<\/p><\/div><\/div><\/div><\/p>\n<div class=\"bp-module-info-wrapper\">\n    <div class=\"container px-0 quote-section type-image-textbox-overlayed py-6  \">\n        <div class=\"row\">\n                            <div class=\"col-12 text is-content mb-n4 mb-md-n8\">\n                                            <p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-67609 size-full\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-titelstory-zitat.jpg\" alt=\"\" width=\"2200\" height=\"550\" srcset=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-titelstory-zitat.jpg 2200w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-titelstory-zitat-800x200.jpg 800w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-titelstory-zitat-1400x350.jpg 1400w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-titelstory-zitat-768x192.jpg 768w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-titelstory-zitat-1536x384.jpg 1536w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-titelstory-zitat-2048x512.jpg 2048w\" sizes=\"auto, (max-width: 2200px) 100vw, 2200px\" \/><\/p>\n\n                                    <\/div>\n                        <span class=\"animation-trigger animate-inview\"><\/span>\n            <div class=\"animated-card col-10 col-md-7 p-4 p-md-5 mx-auto\" style=\"background-color: #daedea\">\n                <i class=\"icon icon-quote\"><\/i>\n                <div class=\"text\" style=\"color: #004d91\">\n                    <h3>Procurement can support the specification of requirements by providing information on hidden costs, qualifying suppliers in advance, and identifying possible problems.<\/h3>\n\n                <\/div>\n            <\/div>\n        <\/div>\n    <\/div>\n\n<\/div>\n<div id=\"role-of-procurement\" class=\"anchor\" data-name=\"Role of procurement\"><\/div>\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\"><div class=\"text-container\">\n    \n<h3>Procurement: More Than Commercial Knowledge<\/h3>\n<p>The role of procurement has changed significantly in recent decades \u2013 away from the purchasing clerk, toward the strategic entity. Successful procurement involves not only obtaining an overview of the procurement processes themselves, but also the upstream and downstream processes. Buyers are used to thinking across departments and processes, identifying potential risks and countering them in good time. Using methods such as cost breakdowns and TCO considerations, buyers ensure transparency and in-depth analyses, providing the necessary background knowledge to plan budgets, processes, and timeframes.<\/p>\n\n    <div class=\"text-collapsed\">\n        \n<p><strong>Practical examples:<\/strong><\/p>\n<p>A company was planning underground transport facilities as part of a large construction project. After installing the rail tracks, bridges and tunnels, it became apparent that only one provider\u2019s trains could be considered because the clearance heights and widths had already been fixed. Involving procurement in the planning process early on could have avoided this.<\/p>\n<p>Another typical example is store layout in retail, initially often a design-driven process whereby procurement can check whether the design department\u2019s drafts can actually be implemented in the budget from the outset. In addition, procurement can point out the bundling and standardization opportunities from the beginning, allowing the design department to plan ahead.<\/p>\n<p>Specifications prepared across departments, coupled with detailed process planning and scheduling, are prerequisites for a successful procurement process. In this way, procurement can determine the optimal purchasing levers for the requirements of the tendering process, the negotiations and, ultimately, the supplier contracts.<\/p>\n\n    <\/div>\n<\/div>\n<button class=\"btn btn-link text-decoration-none text-uppercase text-blue float-none\">\n    <i class=\"icon icon-plus-rounded fs-65 lh-0 mt-n2 me-2 text-orange\"><\/i>\n    Read more\n<\/button>\n<div class=\"text-container\">\n    \n<h2>Avoiding Budget and Time Overruns<\/h2>\n<p>Active risk control by procurement is crucial for completing CAPEX projects successfully within cost and on time, while maintaining optimal quality. Only if it succeeds in anticipating existing risks, balancing them, and counteracting the threat of undesirable developments does the project remain within the planned framework. CAPEX projects in particular that span a long period of time, such as in plant construction or the building industry, are exposed to constant risk, whether because of political or regulatory constraints, natural phenomena, or supplier circumstances. However, uncertainties must be taken into account in the planning. In risk management, procurement acts as a navigator and shows ways to avoid, or at least reduce, these risks.<\/p>\n\n    <div class=\"text-collapsed\">\n        \n<p>In addition, involving procurement has another advantage in that it oversees the whole process. Furthermore, it can directly negotiate services linked to capital goods. Additional savings can often be achieved by tendering out service packages.<\/p>\n<p><strong>The following practical example illustrates the consequences when this does not happen:<\/strong><\/p>\n<p>As part of an extensive construction project, sliding doors were procured and installed as a CAPEX requirement, with the construction department taking responsibility for this. However, they did not take into consideration that these doors would need regular maintenance after installation. Procurement was responsible for securing the maintenance contracts, but was now severely restricted because it was only possible to negotiate with the appointed supplier (lock-in effect). Considerably better terms could have been obtained if the purchase of the sliding doors and the maintenance work had been negotiated immediately as an entire order.<\/p>\n\n    <\/div>\n<\/div>\n<button class=\"btn btn-link text-decoration-none text-uppercase text-blue float-none\">\n    <i class=\"icon icon-plus-rounded fs-65 lh-0 mt-n2 me-2 text-orange\"><\/i>\n    Read more\n<\/button><\/div><\/div><\/div>\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\"><p>&nbsp;<\/p>\n<div class=\"icon-boxes  \" data-moduleID=\"67850\" is=\"summary-box\">\n    <div class=\"summary-box-padding overflow-visible\">\n        <div class=\"icon-box has-icon  fadeIn\" style=\"border-color: rgb(218, 237, 234);\" data-animated-icon=\"true\">\n            \n                <div class=\"icon\">\n                    <div class=\"inner\">\n\n                                                                                    <svg id=\"animatedIcon-5721d80a242796872e47356e4843bc27\" data-id=\"5721d80a242796872e47356e4843bc27\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" xmlns:xlink=\"http:\/\/www.w3.org\/1999\/xlink\" x=\"0px\" y=\"0px\" viewBox=\"0 0 64 64\" xml:space=\"preserve\" width=\"75\" height=\"75\">\n                                    <path fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" d=\"M43,16.4c-3.2-3.1-7.4-4.6-11.8-4.4C23,12.4,16.3,19.2,16,27.4c-0.2,5.1,2.1,10,6.1,13.2C24,42,25,44.1,25,46.2V47h6V34.5l-5.5-3.7c-0.5-0.3-0.6-0.9-0.3-1.4c0.3-0.5,0.9-0.6,1.4-0.3l5.4,3.6l5.5-3.6c0.5-0.3,1.1-0.2,1.4,0.3c0.3,0.5,0.2,1.1-0.3,1.4L33,34.5V47h6v-0.8c0-2.2,1-4.2,2.9-5.7C45.8,37.5,48,32.9,48,28C48,23.6,46.2,19.5,43,16.4z\"\/>\n                                    <path d=\"M27,49h-2v5c0,0.5,0.5,1,1,1h1.1h9.8H38c0.5,0,1-0.5,1-1v-5h-2H27z\" fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\"\/>\n                                    <path d=\"M32,60c3,0,4-2,4-3h-8C28,58,29,60,32,60z\" fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" \/>\n                                    <line fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" class=\"st0\" x1=\"9.9\" y1=\"10.5\" x2=\"16.4\" y2=\"15.6\"\/>\n                                    <line fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" class=\"st0\" x1=\"47.9\" y1=\"36.6\" x2=\"54.4\" y2=\"41.7\"\/>\n                                    <line fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" class=\"st0\" x1=\"9.5\" y1=\"41.4\" x2=\"15.8\" y2=\"36.1\"\/>\n                                    <line fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" class=\"st0\" x1=\"48.2\" y1=\"15.7\" x2=\"54.5\" y2=\"10.4\"\/>\n                                    <line fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" class=\"st0\" x1=\"32\" y1=\"1.8\" x2=\"31.9\" y2=\"10\"\/>\n                                    <line fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" class=\"st0\" x1=\"14.1\" y1=\"26\" x2=\"5.8\" y2=\"26\"\/>\n                                    <line fill=\"none\" stroke-width=\"2\" stroke=\"#a0d60a\" stroke-miterlimit=\"10\" class=\"st0\" x1=\"58.1\" y1=\"26\" x2=\"49.9\" y2=\"26\"\/>\n                                <\/svg>\n                            \n                        \n                    <\/div>\n                <\/div>\n\n            \n            \n                <h3 class=\"title\" style=\"color: rgb(218, 237, 234)\">\n                    CONCLUSION: Escaping the Bermuda Triangle\n                <\/h3>\n\n                <div class=\"content\">\n                    <p>A company\u2019s procurement department ensures transparency through TCO considerations and provides the necessary details for planning the budget, processes, and timeframe. In so doing, it complements the departments that do not always prioritize cost-performance optimisation in procurement, and do not always recognise the consequential costs. While procurement is, of course, responsible for meeting OPEX requirements in practice, CAPEX decisions often lack a balanced distribution of tasks between procurement, departments, and senior management.<\/p>\n<p>This leads to a considerable loss of synergy and untapped optimization potential when budgeting and scheduling the projects. While monitoring and analyzing the reasons for budget overruns in CAPEX projects, it is striking that these could be avoided by involving procurement and professional project management early on.<\/p>\n\n                <\/div>\n\n            \n        <\/div>\n    <\/div>\n<\/div>\n\n<\/div><\/div><\/div>\n<div id=\"use-cases\" class=\"anchor\" data-name=\"Use Cases\"><\/div>\n<div style=\"background-color: #daedea;\">\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\"><h3>Selected CAPEX Use Cases<\/h3>\n<p>Different types of CAPEX vary widely in their characteristics and specifications and, as such, need to be treated very differently. The following projects exemplify procurement success, without taking into account other levers such as demand management.<\/p><\/div><\/div><\/div>\n    <div class=\"is-matrix position-relative pt-3 \" style=\"background-color: #daedea;\">\n        <div class=\"container overflow-visible px-sm-0\">\n                                            <div class=\"header position-sticky is-sticky\">\n                    <div class=\"slider slider-mobile\" data-slider=\"11\" data-slides=\"1.3\" data-style=\"\">\n                        <div class=\"swiper-wrapper d-flex flex-nowrap align-items-stretch\">\n                            <div class=\"swiper-slide is-empty\"><\/div>\n                                                            <div class=\"swiper-slide text-center\">\n                                <span class=\"is-label text-center pb-3 h6 fw-bold text-uppercase\">\n                                                                            <img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/02\/bestellung-60x60-1.png\" width=\"60\" height=\"60\" class=\"is-icon img-fluid\" alt=\"\" title=\"bestellung-60x60-1\">\n                                                                        Procedure\n                                <\/span>\n                                <\/div>\n                                                            <div class=\"swiper-slide text-center\">\n                                <span class=\"is-label text-center pb-3 h6 fw-bold text-uppercase\">\n                                                                            <img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/02\/Innen-und-Aussendienst-60x62-1.png\" width=\"60\" height=\"62\" class=\"is-icon img-fluid\" alt=\"\" title=\"Innen-und-Aussendienst-60x62\">\n                                                                        Success Factors\n                                <\/span>\n                                <\/div>\n                                                            <div class=\"swiper-slide text-center\">\n                                <span class=\"is-label text-center pb-3 h6 fw-bold text-uppercase\">\n                                                                            <img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/02\/flugzeug-60x63-1.png\" width=\"60\" height=\"63\" class=\"is-icon img-fluid\" alt=\"\" title=\"flugzeug-60x63-1\">\n                                                                        Achievements\n                                <\/span>\n                                <\/div>\n                                                    <\/div>\n                    <\/div>\n                <\/div>\n                                        <div class=\"slider slider-mobile\" data-slider=\"11\" data-slides=\"1.3\" data-style=\"\">\n                    <div class=\"swiper-wrapper d-flex flex-nowrap align-items-stretch\">\n                                                    <div class=\"swiper-slide d-block py-3 px-2\">\n                                                                    <span class=\"d-block fw-bold text-uppercase h4 mb-1\">STORE LAYOUT IN FOOD RETAILING<\/span>\n                                                                                                    <span class=\"d-block mb-2 small\">- converting the entire store network<\/span>\n                                                            <\/div>\n                                                                            <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-5\" style=\"background-color: #ffd494;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Involve all areas of responsibility<\/li>\n<li>Carry out test phase<\/li>\n<li>Increase competition through a broad market approach<\/li>\n<\/ul>\n\n                    <svg width=\"55\" height=\"178\" class=\"is-icon\" style=\"color:#000000;\"><use href=\"#icon__curved-arrow\"\/><\/svg>\n                            <span class=\"border-break-outside\" style=\"background-color: #daedea;\"><\/span>\n                        <\/div>\n<\/div>\n                            <\/div>\n                                                    <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-5\" style=\"background-color: #dfeaf8;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Specifications<\/li>\n<li>Standardization + volume bundling<\/li>\n<li>Structured tendering and negotiating<\/li>\n<\/ul>\n\n                    <svg width=\"55\" height=\"178\" class=\"is-icon\" style=\"color:#000000;\"><use href=\"#icon__curved-arrow\"\/><\/svg>\n                            <span class=\"border-break-outside\" style=\"background-color: #daedea;\"><\/span>\n                        <\/div>\n<\/div>\n                            <\/div>\n                                                    <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-4\" style=\"background-color: #afd682;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>7-month timeframe met<\/li>\n<li>18% under budget<\/li>\n<li>Framework contracts signed for entire renovation phase<\/li>\n<li>Optimized + expanded supplier pool<\/li>\n<\/ul>\n\n            <\/div>\n<\/div>\n                            <\/div>\n                                            <\/div>\n                <\/div>\n                            <div class=\"slider slider-mobile\" data-slider=\"11\" data-slides=\"1.3\" data-style=\"\">\n                    <div class=\"swiper-wrapper d-flex flex-nowrap align-items-stretch\">\n                                                    <div class=\"swiper-slide d-block py-3 px-2\">\n                                                                    <span class=\"d-block fw-bold text-uppercase h4 mb-1\">INDUSTRY<\/span>\n                                                                                                    <span class=\"d-block mb-2 small\">- New plant \/ assembly line<\/span>\n                                                            <\/div>\n                                                                            <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-5\" style=\"background-color: #ffd494;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Plan process steps in accordance with technical specifications and risk factors<\/li>\n<li>Specify calls for tender for the individual construction phases<\/li>\n<li>Negotiate with suppliers, including technicians<\/li>\n<\/ul>\n\n                    <svg width=\"55\" height=\"178\" class=\"is-icon\" style=\"color:#000000;\"><use href=\"#icon__curved-arrow\"\/><\/svg>\n                            <span class=\"border-break-outside\" style=\"background-color: #daedea;\"><\/span>\n                        <\/div>\n<\/div>\n                            <\/div>\n                                                    <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-5\" style=\"background-color: #dfeaf8;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Interdisciplinary teamwork<\/li>\n<li>Comparison with reference projects<\/li>\n<li>Process optimization<\/li>\n<li>Active risk management and TCO considerations<\/li>\n<\/ul>\n\n                    <svg width=\"55\" height=\"178\" class=\"is-icon\" style=\"color:#000000;\"><use href=\"#icon__curved-arrow\"\/><\/svg>\n                            <span class=\"border-break-outside\" style=\"background-color: #daedea;\"><\/span>\n                        <\/div>\n<\/div>\n                            <\/div>\n                                                    <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-4\" style=\"background-color: #afd682;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Came within budget, even under budget in some phases<\/li>\n<li>Kept to schedule<\/li>\n<li>Avoided risk of default<\/li>\n<\/ul>\n\n            <\/div>\n<\/div>\n                            <\/div>\n                                            <\/div>\n                <\/div>\n                            <div class=\"slider slider-mobile\" data-slider=\"11\" data-slides=\"1.3\" data-style=\"\">\n                    <div class=\"swiper-wrapper d-flex flex-nowrap align-items-stretch\">\n                                                    <div class=\"swiper-slide d-block py-3 px-2\">\n                                                                    <span class=\"d-block fw-bold text-uppercase h4 mb-1\">CONSTRUCTION OF NEW <\/span>\n                                                                                                    <span class=\"d-block mb-2 small\">Shopping Center<\/span>\n                                                            <\/div>\n                                                                            <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-5\" style=\"background-color: #ffd494;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Break down the overall plan into individual phases<\/li>\n<li>Demonstrate saving and bundling potential according to construction phase<\/li>\n<li>Create a supplier pool for short-term contracts<\/li>\n<\/ul>\n\n                    <svg width=\"55\" height=\"178\" class=\"is-icon\" style=\"color:#000000;\"><use href=\"#icon__curved-arrow\"\/><\/svg>\n                            <span class=\"border-break-outside\" style=\"background-color: #daedea;\"><\/span>\n                        <\/div>\n<\/div>\n                            <\/div>\n                                                    <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-5\" style=\"background-color: #dfeaf8;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Coordinating the entire team and the planning offices<\/li>\n<li>Defining procurement processes and guidelines<\/li>\n<li>Standardizing construction phases<\/li>\n<li>Detailed description in the catalog of services<\/li>\n<\/ul>\n\n                    <svg width=\"55\" height=\"178\" class=\"is-icon\" style=\"color:#000000;\"><use href=\"#icon__curved-arrow\"\/><\/svg>\n                            <span class=\"border-break-outside\" style=\"background-color: #daedea;\"><\/span>\n                        <\/div>\n<\/div>\n                            <\/div>\n                                                    <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-4\" style=\"background-color: #a0d60a;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Identified appropriate suppliers for all phases<\/li>\n<li>Reduced complexity through standardization<\/li>\n<li>Complied with budget and timeframes<\/li>\n<\/ul>\n\n            <\/div>\n<\/div>\n                            <\/div>\n                                            <\/div>\n                <\/div>\n                            <div class=\"slider slider-mobile\" data-slider=\"11\" data-slides=\"1.3\" data-style=\"\">\n                    <div class=\"swiper-wrapper d-flex flex-nowrap align-items-stretch\">\n                                                    <div class=\"swiper-slide d-block py-3 px-2\">\n                                                                    <span class=\"d-block fw-bold text-uppercase h4 mb-1\">IT <\/span>\n                                                                                                    <span class=\"d-block mb-2 small\">- Server Procurement<\/span>\n                                                            <\/div>\n                                                                            <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-5\" style=\"background-color: #ffd494;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Plan requirements<\/li>\n<li>Standardize specifications and requirement profiles<\/li>\n<li>Include relevant maintenance services<\/li>\n<li>Issue call for tender + negotiate the annual requirement<\/li>\n<\/ul>\n\n                    <svg width=\"55\" height=\"178\" class=\"is-icon\" style=\"color:#000000;\"><use href=\"#icon__curved-arrow\"\/><\/svg>\n                            <span class=\"border-break-outside\" style=\"background-color: #daedea;\"><\/span>\n                        <\/div>\n<\/div>\n                            <\/div>\n                                                    <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-5\" style=\"background-color: #dfeaf8;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>Defining procurement strategy and processes for servers<\/li>\n<li>Total support contract for services with one supplier<\/li>\n<\/ul>\n\n                    <svg width=\"55\" height=\"178\" class=\"is-icon\" style=\"color:#000000;\"><use href=\"#icon__curved-arrow\"\/><\/svg>\n                            <span class=\"border-break-outside\" style=\"background-color: #daedea;\"><\/span>\n                        <\/div>\n<\/div>\n                            <\/div>\n                                                    <div class=\"swiper-slide\">\n                                <div class=\"is-bordered-card position-relative mt-4 mb-4 me-4\" style=\"background-color: #a0d60a;\">\n    <div class=\"is-bordered position-relative p-2 pt-6 pe-6 mt-n3 me-n3 mb-3 ms-3\" style=\"border-color: #000000;\">\n        <ul>\n<li>12% under budget<\/li>\n<li>Best possible cost control<\/li>\n<li>Reduced the risk of default<\/li>\n<li>Data security ensured<\/li>\n<\/ul>\n\n            <\/div>\n<\/div>\n                            <\/div>\n                                            <\/div>\n                <\/div>\n                    <\/div>\n    <\/div>\n\n<\/div>\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-12\"><div id=\"expert-interviews\" class=\"anchor\" data-name=\"Expert-Interviews\"><\/div>\n<div class=\"componentPadding container pop-up-boxes multipleLayout fadeIn  \">\n    <div>\n                <h2 class=\"title text- main-title fw-normal\" style=\"color: #282828\">Experts on CAPEX<\/h2>\n                        <div class=\"row row--multiple\">\n                                                            <div class=\"col-md-6 mb-4 mb-md-2\">\n                                            <div class=\"box \" aria-title=\"Mehr Lesen\" title=\"Mehr Lesen\" data-toggle=\"collapse\" data-target=\"box-fbc91321b0135cd5191708760807a2a3\">\n                            <div class=\"image-container\">\n                                <div class=\"holder\">\n                                    <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/experten-maschinenbau-400x420.jpg\" class=\"img-fluid\" loading=\"lazy\" width=\"400\" height=\"420\" \/>\n                                    <div class=\"overlay\"><\/div>\n                                <\/div>\n                                <div class=\"title\" style=\"color: #f2910a\">\n                                     CAPEX in Machine and Plant Construction\n                                                                    <\/div>\n                            <\/div>\n                        <\/div>\n                    <\/div>\n                                                            <div class=\"col-md-6 mb-4 mb-md-2\">\n                                            <div class=\"box \" aria-title=\"Mehr Lesen\" title=\"Mehr Lesen\" data-toggle=\"collapse\" data-target=\"box-a8606ec9c8f32a552254743f9d1240b0\">\n                            <div class=\"image-container\">\n                                <div class=\"holder\">\n                                    <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/experten-handel-2-400x420.jpg\" class=\"img-fluid\" loading=\"lazy\" width=\"400\" height=\"420\" \/>\n                                    <div class=\"overlay\"><\/div>\n                                <\/div>\n                                <div class=\"title\" style=\"color: #f2910a\">\n                                    CAPEX in Retail\n                                                                    <\/div>\n                            <\/div>\n                        <\/div>\n                    <\/div>\n                                                            <div class=\"col-md-6 mb-4 mb-md-2\">\n                                            <div class=\"box \" aria-title=\"Mehr Lesen\" title=\"Mehr Lesen\" data-toggle=\"collapse\" data-target=\"box-5186f24b771af95d21c921cb8f29c568\">\n                            <div class=\"image-container\">\n                                <div class=\"holder\">\n                                    <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-einkaufshebel-400x420.png\" class=\"img-fluid\" loading=\"lazy\" width=\"400\" height=\"420\" \/>\n                                    <div class=\"overlay\"><\/div>\n                                <\/div>\n                                <div class=\"title\" style=\"color: #f2910a\">\n                                    CAPEX in the Energy Sector\n                                                                    <\/div>\n                            <\/div>\n                        <\/div>\n                    <\/div>\n                                                            <div class=\"col-md-6 mb-4 mb-md-2\">\n                                            <div class=\"box \" aria-title=\"Mehr Lesen\" title=\"Mehr Lesen\" data-toggle=\"collapse\" data-target=\"box-524e475f6284b4e0690e151e33fb78b8\">\n                            <div class=\"image-container\">\n                                <div class=\"holder\">\n                                    <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/experten-it-2-400x420.jpg\" class=\"img-fluid\" loading=\"lazy\" width=\"400\" height=\"420\" \/>\n                                    <div class=\"overlay\"><\/div>\n                                <\/div>\n                                <div class=\"title\" style=\"color: #f2910a\">\n                                    CAPEX in IT\n                                                                    <\/div>\n                            <\/div>\n                        <\/div>\n                    <\/div>\n                            <\/div>\n                            <div class=\"popup-box\" id=\"box-fbc91321b0135cd5191708760807a2a3\" class=\"collapsed\" style=\"background-color:#2a3235;\">\n                    <div class=\"overlay\" style=\"background: linear-gradient(to top, #2a3235, transparent);\"><\/div>\n                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/experten-maschinenbau.jpg\" class=\"bg-image img-fluid\" loading=\"lazy\">\n                                        <span class=\"close-btn\" data-toggle=\"collapse\" data-target=\"box-fbc91321b0135cd5191708760807a2a3\"><\/span>\n                    <div class=\"popup-inner\">\n                                                                                    <h1 class=\"popup-title h4\" style=\"color: #a0d60a\">Project-CAPEX in Machine and Plant Construction<\/h1>\n                                                                            <div class=\"popup-content-header\">\n                                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/08\/MD_Thibault-Pucken_neu_350x440px.png\" class=\"header-image\" width=\"286\" height=\"360\" loading=\"lazy\" alt=\"Project-CAPEX in Machine and Plant Construction\" \/>\n                                                        <div class=\"popup-content-header-textbox\">\n                                                                    <div class=\"quote h2\" >\n                                        <span style=\"color: #ffffff\">\n                                            \"Untapped Potential Especially in Mid-Sized Companies\"\n                                        <\/span>\n                                    <\/div>\n                                                                                                    <div class=\"quote-text\" style=\"color: #01aead\">\n                                        <p>Managing Director Thibault Pucken is responsible for comprehensive procurement projects in industrial companies. We asked him about the situation with CAPEX procurement in leading corporations and in larger mid-sized companies.<\/p>\n\n                                    <\/div>\n                                                            <\/div>\n                        <\/div>\n                        <div class=\"main-content\">\n                            <p><strong>How important is CAPEX in industry?<\/strong><\/p>\n<p>CAPEX projects are only important in a few industrial sectors, such as energy and construction. Large and, in particular, recurring CAPEX investments play an important role in industry. However, the maturity of CAPEX procurement in companies can be very different.<\/p>\n<p><strong>You would think that dealing with CAPEX projects would be routine in industry.<\/strong><\/p>\n<p>That is unreservedly true for the big players. However, there is a significant difference between big corporations and mid-sized companies. While corporations are very mature and professional when it comes to CAPEX, and in some cases have their own organizations for it, mid-sized companies have major shortcomings.<\/p>\n<p><strong>What is the main difference between the big players and mid-sized companies?<\/strong><\/p>\n<p>In industry, it is usually about investing in replacement machinery. This is quite normal for major players such as the automotive industry because, in a factory, machine parts have to be constantly replaced with new ones. To avoid downtime as much as possible, these companies have well-established structures for CAPEX procurement. Although new plants are being built much less frequently, this is still more common in large companies than in mid-sized companies. Since these requirements are rarely relevant in mid-sized companies, strategically-aligned CAPEX procurement just does not happen.<\/p>\n<p><strong>How do mid-sized companies get around this problem?<\/strong><\/p>\n<p>Often, not at all! Our experience shows that CAPEX has neither a culture of controversy nor an open discussion around it. Mid-sized industries do not realize how much money they are wasting through their current shortcomings in CAPEX procurement.<\/p>\n<p><strong>Who takes care of the resulting CAPEX requirements?<\/strong><\/p>\n<p>Planning and decisions are simply left to the departments and planners, so functionally-driven commercial expertise is ignored.<\/p>\n<p><strong>And what is the intention behind this?<\/strong><\/p>\n<p>None, to be perfectly clear. It is more the result \u2013 whether consciously or unconsciously \u2013 of a lack of imagination, and sometimes there is just no desire to leave their comfort zone. Establishing or optimizing viable procurement structures is a complex process that requires cross-functional teamwork, and many mid-sized companies shy away from making this effort.<\/p>\n<p><strong>How would you advise mid-sized companies?<\/strong><\/p>\n<p>The first step is to create transparency about CAPEX expenditure and reveal the potential. Then, that can serve as a basis to plan the next process. Since many companies only rarely have CAPEX projects, it does not always make sense to create a separate organization for this, which is what big corporations are able to do. But there should be a defined process for CAPEX procurement in every company, where the individual process steps, roles, and responsibilities are clearly defined for all parties involved. Only then can the identified potential be achieved.<\/p>\n\n                        <\/div>\n                    <\/div>\n                <\/div>\n                            <div class=\"popup-box\" id=\"box-a8606ec9c8f32a552254743f9d1240b0\" class=\"collapsed\" style=\"background-color:#2a3235;\">\n                    <div class=\"overlay\" style=\"background: linear-gradient(to top, #2a3235, transparent);\"><\/div>\n                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/experten-handel-2.jpg\" class=\"bg-image img-fluid\" loading=\"lazy\">\n                                        <span class=\"close-btn\" data-toggle=\"collapse\" data-target=\"box-a8606ec9c8f32a552254743f9d1240b0\"><\/span>\n                    <div class=\"popup-inner\">\n                                                                                    <h1 class=\"popup-title h4\" style=\"color: #a0d60a\">Project CAPEX in Retail<\/h1>\n                                                                            <div class=\"popup-content-header\">\n                                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/08\/simone-hilbring-md-350x360.png\" class=\"header-image\" width=\"350\" height=\"360\" loading=\"lazy\" alt=\"Project CAPEX in Retail\" \/>\n                                                        <div class=\"popup-content-header-textbox\">\n                                                                    <div class=\"quote h2\" >\n                                        <span style=\"color: #ffffff\">\n                                            \"The Role of Procurement has to be Strengthened\"\n                                        <\/span>\n                                    <\/div>\n                                                                                                    <div class=\"quote-text\" style=\"color: #01aead\">\n                                        <p>Simone Sofia Hilbring is a Managing Director at KGM Strategy in our Cologne office. She is an expert for the topics of consumer and retail sector.<\/p>\n\n                                    <\/div>\n                                                            <\/div>\n                        <\/div>\n                        <div class=\"main-content\">\n                            <p><strong>What basic recommendations would you make to companies when it comes to procurement of store layout requirements?<\/strong><\/p>\n<p>I would generally advise retail companies to make the procurement process for store layout and visual merchandising as efficient as possible, using all the necessary freedom of creativity and design they have. Above all, that means reducing complexity and increasing standardization.<\/p>\n<p><strong>Is store layout particularly complex?<\/strong><\/p>\n<p>Yes, because in this sector, there is usually a lot of stakeholders with specific requirements and interests: designers, the store building department, and also often corporate management, because store layout is a senior management issue. Procurement is then frequently the last link in the process chain.<\/p>\n<p><strong>And how could this predicament be resolved?<\/strong><\/p>\n<p>The real challenge is to coordinate CAPEX requirements. This means creating a central coordination point, requiring interdisciplinary teamwork in all the relevant business units.<\/p>\n<p><strong>Does that not usually happen anyway?<\/strong><\/p>\n<p>No, it is more the exception rather than the rule. Individual departments often cooperate very little, or even not at all. This must be reconciled in order to effectively leverage the opportunities for synergy.<\/p>\n<p><strong>Can you explain this using a real-life example?<\/strong><\/p>\n<p>Yes, there was a large food company with several independent subsidiaries setting out to equip its stores with 36 different shopping carts, because each subsidiary buys them independently. Significant savings were made by standardizing three different types and creating bundled procurement for all stores. This applied across the whole group, but everything was coordinated through a purchasing unit such as central procurement. Of course, every subsidiary still has control over its own designs and can add its own branding to its shopping carts.<\/p>\n<p><strong>How skilled would procurement be in terms of design?<\/strong><\/p>\n<p>Procurement does not, of course, deal with technical questions autonomously, because ultimately it is, and remains, merely an executive body of consumers, equipped with commercial expertise. It should, however, be closely involved in the design process to ensure that designs are realistic and achievable, and that the budget is not exceeded. The keywords here are \u201ccommercial knowledge\u201d. Procurement can pre-qualify suppliers in the early design phases and perform practical design tests.<\/p>\n<p><strong>Will CAPEX not lose importance in the wake of continued growth in online trade?<\/strong><\/p>\n<p>No, quite the opposite. In relative terms, this shift will even cause CAPEX to rise in the future, although traditional bricks-and-mortar retailers will tend to stagnate or decline. But, when it comes to the shopping experience itself, customer expectations of those retailers are increasing. To meet this demand, retailers need to become more innovative in equipping their stores, meaning the costs will rise.<\/p>\n\n                        <\/div>\n                    <\/div>\n                <\/div>\n                            <div class=\"popup-box\" id=\"box-5186f24b771af95d21c921cb8f29c568\" class=\"collapsed\" style=\"background-color:#2a3235;\">\n                    <div class=\"overlay\" style=\"background: linear-gradient(to top, #2a3235, transparent);\"><\/div>\n                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/capex-einkaufshebel.png\" class=\"bg-image img-fluid\" loading=\"lazy\">\n                                        <span class=\"close-btn\" data-toggle=\"collapse\" data-target=\"box-5186f24b771af95d21c921cb8f29c568\"><\/span>\n                    <div class=\"popup-inner\">\n                                                                                    <h1 class=\"popup-title h4\" style=\"color: #a0d60a\"> Project CAPEX in the Energy Sector<\/h1>\n                                                                            <div class=\"popup-content-header\">\n                                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/08\/MD_Stefan-Benett_350x440px_neu-350x360.png\" class=\"header-image\" width=\"350\" height=\"360\" loading=\"lazy\" alt=\" Project CAPEX in the Energy Sector\" \/>\n                                                        <div class=\"popup-content-header-textbox\">\n                                                                    <div class=\"quote h2\" >\n                                        <span style=\"color: #ffffff\">\n                                            \"Strategic Risk Management is Essential in Project Procurement\"\n                                        <\/span>\n                                    <\/div>\n                                                                                                    <div class=\"quote-text\" style=\"color: #01aead\">\n                                        <p>Stefan Benett is the Managing Director of KGM Strategy in Munich. He looks after customers primarily in CAPEX-intensive industries such as raw materials and energy.<\/p>\n\n                                    <\/div>\n                                                            <\/div>\n                        <\/div>\n                        <div class=\"main-content\">\n                            <p><strong>What are the biggest challenges facing the energy sector?<\/strong><\/p>\n<p>Planning cycles for these investments are very long-term. Life cycle planning often stretches over decades. Reasonably realistic planning therefore requires key risk factors to be identified early. An adequate timeframe for critical procurement decisions, the most specific requirement planning possible, detailed construction phases, and sub-projects to complete the design stage are all crucial from a procurement point of view.<\/p>\n<p>To meet the planned requirements on time and in line with specifications, the timeframes for strategic procurement processes and critical delivery must be taken into consideration from the outset as part of project planning. Despite a relatively high degree of maturity in project management and capital goods procurement in energy companies, there is often still work to be done in timely, cross-functional cooperation.<\/p>\n<p><strong>What other factors play an important role?<\/strong><\/p>\n<p>In spite of high volumes of regular investment, gaining optimal benefit from the experience of previous projects is often neglected, something that is due mainly to low staff continuity. In addition, project processes, including involvement in procurement, are insufficiently standardized. This begins with determining the optimal project structure for construction phases and signing appropriate agreements to incentivize partners in terms of crucial objectives, such as the date of commissioning. Procurement, as part of the project team, should help shape relationships with key partners from the outset, ideally using project-related managers. This includes actively monitoring the change process in projects in order to minimize any additional demands by using effective follow-up management.<\/p>\n<p><strong>How can procurement ensure compliance with planning values?<\/strong><\/p>\n<p>Strategic risk management is essential for this. To estimate the impact, a model-based evaluation of the effects of strategic procurement on project efficiency, complexity, and scheduling is crucial. The risk of delay can then be evaluated financially, and any possible additional costs, for example from changing suppliers, can be calculated, in order to make the right decisions.<\/p>\n\n                        <\/div>\n                    <\/div>\n                <\/div>\n                            <div class=\"popup-box\" id=\"box-524e475f6284b4e0690e151e33fb78b8\" class=\"collapsed\" style=\"background-color:#2a3235;\">\n                    <div class=\"overlay\" style=\"background: linear-gradient(to top, #2a3235, transparent);\"><\/div>\n                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2022\/06\/experten-it-2.jpg\" class=\"bg-image img-fluid\" loading=\"lazy\">\n                                        <span class=\"close-btn\" data-toggle=\"collapse\" data-target=\"box-524e475f6284b4e0690e151e33fb78b8\"><\/span>\n                    <div class=\"popup-inner\">\n                                                                                    <h1 class=\"popup-title h4\" style=\"color: #a0d60a\">Project - CAPEX in IT<\/h1>\n                                                                            <div class=\"popup-content-header\">\n                                                            <img decoding=\"async\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2023\/05\/sven-brueggeboes-gross-350x360.png\" class=\"header-image\" width=\"350\" height=\"360\" loading=\"lazy\" alt=\"Project - CAPEX in IT\" \/>\n                                                        <div class=\"popup-content-header-textbox\">\n                                                                    <div class=\"quote h2\" >\n                                        <span style=\"color: #ffffff\">\n                                            \"The separate consideration of CAPEX and OPEX in IT purchasing is counterproductive.\"\n                                        <\/span>\n                                    <\/div>\n                                                                                                    <div class=\"quote-text\" >\n                                        <p>Sven Br\u00fcggeboes is Principal at KGM Strategy in Cologne and an expert in indirect spend.<\/p>\n\n                                    <\/div>\n                                                            <\/div>\n                        <\/div>\n                        <div class=\"main-content\">\n                            <p><strong>Why do you argue that OPEX and CAPEX should not be considered separately?<\/strong><\/p>\n<p>Whether a requirement is OPEX or CAPEX is initially completely irrelevant from the buyer\u2019s point of view and only has consequences for the subsequent financial posting. The practice of separating OPEX and CAPEX requirements is counterproductive, as this lacks the necessary transparency in mixed product groups. I would therefore argue that purchasing should first only be differentiated according to functional IT product groups, which then contain all the requirements of this category, whether OPEX or CAPEX.<\/p>\n<p><strong>What does this mean in concrete terms in IT procurement?<\/strong><\/p>\n<p>The procurement of a server, for example, is CAPEX or OPEX, depending on whether it is purchased, leased or procured as-a-service. For the demand planners, however, it is not relevant how the server is procured, because the demand is always the same. Only the procurement channels are different. Consequently, the anticipated separation of OPEX and CAPEX is premature from a purchasing point of view. The merger, on the other hand, ensures transparency and enables more efficient viewing and support together with the procurement department.<\/p>\n<p><strong>In your opinion, where else are the IT requirements affected?<\/strong><\/p>\n<p>In IT, there is sometimes an excessive need for security and a latent aversion to risk. This often leads to a considerable over-specification of actual requirements. Take the example of a new data line. This is where IT decides in favour of the feature with the highest availability. However, this decision is neither future-oriented nor appropriate. This would be the case if the capacity of the data line could be flexibly adapted to the respective future requirements and already available models of the market could be used.<\/p>\n<p><strong>How can such situations be solved?<\/strong><\/p>\n<p>Through trustful cooperation between the specialist department and procurement \u2013 throughout the entire purchasing process. Always on the basis of IT requirements, Purchasing can already support the vendor-independent specification, methodically accompany the joint market development, help evaluate alternatives from a business point of view and point out potentials.<\/p>\n\n                        <\/div>\n                    <\/div>\n                <\/div>\n                        <\/div>\n<\/div>\n<\/div><\/div><\/div>\n<div class='container  py-3'><div class=\"row \"><div class=\"col-lg-6\"><h3>By subscribing to our newsletter, you will receive the current issue of our customer magazine Supply Management Insights three times a year:<\/h3>\n<p><script charset=\"utf-8\" type=\"text\/javascript\" src=\"\/\/js-eu1.hsforms.net\/forms\/embed\/v2.js\"><\/script><br \/>\n<script>\n  hbspt.forms.create({\n    region: \"eu1\",\n    portalId: \"143321638\",\n    formId: \"df71e96e-8cfd-4765-b2a2-caeb009369b4\"\n  });\n<\/script><\/p><\/div>\n<div class=\"col-lg-6\"><p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-56565\" src=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/10\/Magazine-neu-freigestellt-1-684x630.png\" alt=\"\" width=\"684\" height=\"630\" srcset=\"https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/10\/Magazine-neu-freigestellt-1-684x630.png 684w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/10\/Magazine-neu-freigestellt-1-768x708.png 768w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/10\/Magazine-neu-freigestellt-1-1536x1416.png 1536w, https:\/\/www.KGM Strategy.com\/wp-content\/uploads\/2021\/10\/Magazine-neu-freigestellt-1-2048x1887.png 2048w\" sizes=\"auto, (max-width: 684px) 100vw, 684px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p><\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":10,"featured_media":63022,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"Explore CAPEX procurement insights, roles, success factors, and real use cases. 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