Global manufacturer - procuring*

Our experience...

We were asked to provide strategic procurement and supply chain support to the Client. The Client had multiple entities within its Group, with operations in the UK and USA.

This aim of the project was to identify strategic opportunities for cost reduction within the supply chain and deliver on those cost improvement opportunities for the Group.

This involved the following:

Manipulation of third-party supplier spend data to allow us to conduct a comprehensive spend analysis on Group expenditure.
Creation and presentation of a spend analysis report which was used as a tool for confirming a set of prioritised strategic sourcing initiatives to target Group cost improvement opportunities.
Conducted project mobilisation workshops for each strategic sourcing initiative with stakeholders across the Group.
Performed successful strategic sourcing initiatives across a wide range of direct spend categories such as Packaging Services, Print Services, Freight Forwarding Services, Courier Services, Haulage Services, and Warehouse Services.
Definition of a clear saving recording methodology for each strategic sourcing initiative which ensured all cost reduction benefits were tracked and reported on.
Knowledge transfer sessions for the Client on the procurement and supply cycle throughout the life of the project.

Our approach…

The first phase of our approach was to investigate the third-party supplier spend data of each entity within the Group. Data from the accounts payable system of each entity was collected, cleansed into a workable format, and combined to display a groupwide view on the expenditure profile. Our procurement categorisation structure was applied to the data which presented a different perspective on the third-party supplier spend, allowing for an aggregation of similar spend areas across the Group. Our category experts conducted various pieces of analysis on the data and identified categories of potential saving opportunities through their knowledge of the market and level of spend across the supplier roster. This spend analysis and category experience was combined to produce a comprehensive spend analysis report which contained a prioritised strategic sourcing activity plan. The report was presented to the Client, and a list of strategic sourcing initiatives was agreed.

The focus of our approach then turned to optimising the category procurement for the strategic sourcing initiatives. This phase of the project involved the use of our Sourcery Approach which provided a best practice approach to the procurement activity and sourcing management.

Work commenced on mobilising these initiatives by engaging with stakeholders and gathering copies of supplier contracts, price schedules, specifications, and supplier management information reports. Mobilisation workshops were held with stakeholders to allow us to gather information on the business requirements and existing supplier relationships associated with the strategic sourcing initiative. Our consultants analysed this information, developed the sourcing strategy, and produced the tender documentation to be used for the approach to the supply market. A formal structured tender process was then conducted to select the most economically advantageous supplier having regard to both price and non-price criteria. Following the supplier selection, we managed the contractual negotiations between the legal teams from both parties and supported where required on commercial matters.

Once a new contract for the strategic sourcing initiative had been executed, we provided an information hand over document back to the Client containing all of the relevant project details. Our approach at this stage focused upon confirming the savings definition and recording methodology with the Client to ensure the cost reduction benefits were tracked and reported on. These cost savings are monitored and reported on each month.

Best practice…

Our approach to the project was underpinned by our deep knowledge of best practice principles with regards to procurement and supply chain.

These best practice principles are engrained in the Sourcery Approach which we follow for manging the sourcing process for the cost improvement opportunities.

The Sourcery Approach covers three stages of procurement activity. These three stages involve preparing the tender, running the tender, and implementing the outcome of the tender. Our best practice approach places a great deal of importance on the process of becoming ‘tender ready’. This part of the process is vital for the success of a strategic sourcing initiative as it focuses on ensuring that the business requirements are fully understood, and the most suitable sourcing strategy is clearly defined prior to collecting any bids from the marketplace.

This best practice approach provides a strong process and framework for global procurement operations. It ensures that all aspects of the sourcing cycle are completed in a professional, consistent, and structured manner across an organisation.

This best practice approach results in:

The development of closer working relationships with subject matter experts and business areas across the Client to produce tender documents with clearly defined requirements and selection criteria;
A formal supplier selection process which can be standardised across the Client with structured tendering which facilitates the selection of suppliers who not only provide the best commercial offer, but clearly meet the defined business requirements.
The introduction of Supplier Relationship Management across the supply base for the Client. The tender activity and new contracts provide the foundation for creating the appropriate relationship and environment in which service levels can be monitored throughout the life of the contract to ensure that value is not eroded.

Organisational benefits…

The key objective of the project was to deliver cost reduction benefits to the Client. Cost reductions were achieved on each of the strategic sourcing initiatives which we conducted for the Client with no disruption to the operations of each entity.

In particular:

Packaging Services:

Conducted a multistage Invitation To tender (“ITT”) process for the portfolio of packaging requirements of each entity across the Group. We followed a national sourcing strategy for this category of Group spend which involved separate tenders for the UK and USA market. Incumbent suppliers and alternative highly credible packaging suppliers in each market were invited to participate. The outcome of the ITT process was that we negotiated a range of price reductions off the core packaging items purchased with each incumbent supplier in the UK and USA. The savings associated with the new prices are forecasted to deliver annualised savings of £145,000.

Print Services:

Carried out a stage one ITT process and final direct negotiations with a number of incumbent print supplier to each UK entity in the Group. The outcome of the final negotiations was that we negotiated a flat percentage discount offer from each incumber supplier for their existing print product lines. The savings associated with these flat percentage discounts are forecasted to deliver annualised savings of £62,000.

Freight Forwarding Services:

Performed a multistage ITT process which involved the requirements and container volumes of each entity across the UK and USA. A global sourcing strategy was followed for this category of spend which involved one large tender containing the individual freight forwarding requirements of each entity. Incumbent suppliers and alternative global forwarders were invited to participate in the tender. The outcome of the project was that we secured reduced rate cards for a number of key routes for each entity with their respective incumbent forwarding suppliers. The savings associated with the reduced rates cards were forecasted to deliver annualised savings of approximately £100,000.

Courier Services:

Conducted a multistage ITT process which involved the requirements and parcel volumes of each entity across the UK and USA. A global sourcing strategy was followed for this category of spend which involved one large tender containing the individual courier requirements of each entity. Incumbent suppliers and alternative global courier service providers were invited to participate in the tender. The outcome of the project was that we secured a range of discount reductions off the existing tariffs for each entity with their respective incumbent courier supplier. The savings associated with the range of tariff reductions were forecasted to deliver annualised savings of approximately £87,000.