Situation Summary
Situation
• A car manufacturer
• Multiple factories and production sites in countries of presence
• Procurato was asked to conduct an Opportunity Assessment (OA) to identify improvement opportunities and potential savings for the company in particular categories across Indirect and Direct spend
Objectives
• Understand and control rapidly increasing spend across Direct and Indirect categories
• Understand key drivers of expenses and the reason why different suppliers of the same application are not used across all countries
• Gather benchmarking data to compare existing deals to the market
• Compare existing company’s deals across countries with local deals
• Standardize the processes across multiple plants to achieve stability and reduce risks
• Consolidate the suppliers
• Unlock savings opportunities as a result
Key activities
Phase I
• Understood the current processes, issues and key focus areas
• Understood how the client was buying goods and services (trends and patterns)
• Calculated the split between company’s deals and local deals made and identified the reasons behind it
• Benchmarked existing deals and found the opportunities for better deals with both new and existing suppliers
Phase II
• Negotiated contract terms with existing suppliers to achieve consolidation
• Found suppliers who could provide goods and services to more countries of client’s presence on better terms
• Investigated alternative products and services
• Introduced changes with necessary trainings to implement new approaches
Benefits achieved
Phase I
• Identified savings of €20m+
• Facilitated the work of procurement teams across countries by providing them with benchmarking data and new processes to evaluate existing and potential deals
Phase II
• Began several initiatives across all Direct spend
• Better procurement structure
• Further value delivered through reducing complexity (standardization of data and specs, supplier consolidation) and better visibility across spend
• Documented the process in order to set new sites up using the same strategy in the future
Lessons learned
• Standardization of spend is the first step to achieve full visibility across multiple countries as procurement teams can call things differently and it won’t be captured
• Interviews with category managers/buying experts are crucial to understand the business and approaches
• Make sure we factor in the Benchmarking the differences between standard of service
See also how we leverage SpendQube, our Spend Analytics Software, to identify savings and improve procurement efficiency in our Opportunity Assessment and Strategic Roadmap case study.
