Engage Consultant For Rapid Procurement Transformation and Fast Time To Savings

SITUATION OVERVIEW A newly hired CPO was not going to be able to be fully engaged with his new company, a national transportation equipment and service provider, for several months.  The Company’s leadership had high expectations and had set aggressive savings targets for his first 12 months.  Realizing that it takes time to understand the spend and opportunities, the CPO engaged Chris Lemnah, a long standing member of the OnDemand Professional Network to quickly analyze the spend and conduct the initial opportunity assessment (“OA”). APPROACH Chris kicked off an opportunity assessment consisting of stakeholder interviews, PO & AP spend analysis, and contract reviews.  He also spoke with the existing procurement team members to better understand their current focus, as well as past activities. The information gathered was used to create an OA package that presented the opportunities across 4 workstreams: ControlsKey Customer InitiativesSpend Reduction TeamsTechnology Enablers The Controls workstream focused on getting Procurements involved up front in supplier selection, vendor master additions and maintenance, contract reviews, and requisition approvals. Key Customer Initiatives the team was involved in included enterprise-wide initiatives for Telecom, Benefits, and Oracle. Spend Reduction teams focused on a myriad of projects in various areas identified during the OA and brought to the team by other departments. Chris sourced and implemented multiple technology solutions for the client to help organize and solidify their sourcing and contracting processes. CRITICAL SUCCESS FACTORS Engaging & Aligning Stakeholders – Finance, IT & Operations were all engaged to help understand their impressions of the current procurement team and where they thought procurement could add more value.Data Integrity – despite having relatively few...

Multiple Procurement Cost Reduction Strategies Drove Fast Savings Across Diverse Spend For Ground Moving Equipment Manufacturer

A PE-owned mid-market ground moving equipment manufacturer needed to quickly drive procurement savings ahead of impending major transactions. With disaggregated spend and vendor concentration across direct and indirect categories, they were looking for an expert who could quickly identify opportunities and help them execute varied strategies to maximize savings in the shortest period of time. They turned to OnDemand and selected a member of our Professional Network Kenton Phillips. CHALLENGE The mid-market position and spend levels of the company required lean, rapidly executed initiatives to maximize the project ROI, but the diverse range of products and services in scope necessitated a range of category-specific approaches to achieve the maximum savings. Multiple categories with a wide range of volumes – the category characteristics and varying spend levels required multiple different sourcing strategies to be planned and executed in a short timeframe.Product specification rationalization – the rationalization of specifications required by some categories drove the review of hundreds of engineering documents and substantial engagement with engineering personnel across two company locations.Sole-source products and limited switching capability – other categories had limited alternative vendors or were limited in the client’s ability to switch leading to the need for sole-source, limited-source and time-phased sourcing strategies. APPROACH Client-tailored and category-specific approaches were designed to rapidly capture the greatest amount of savings within the limited timeframe. Assessment and quick hits – during the assessment, categories were grouped by sourcing technique and other characteristics to accelerate the capture of quick-hit opportunities and enable the most efficient and effective strategic sourcing execution.  Some of the quickest savings results were achieved by leveraging group purchasing and volume concentration...

Strategic Sourcing for Pharmacovigilance (PV) Services – Creating a Collaborative Environment to Improve Services and Reduce Costs

Sourcing is often designed as a cost saving exercise. However, in the case of complex services that are integral to an enterprise success, sourcing can often result in a better solution for the organization, not just savings. We like to think of this as a win-win opportunity – better service levels, lower costs – and if driven/supported by senior leadership can reap great rewards. Below I share an excerpt from Dave Stowe, a long-time member of our OnDemand Professional Network, that I think exemplifies this kind of complex sourcing – this time at a high-growth BioPharma company that was outgrowing the capabilities of it’s Pharmacovigilance Services (PV*) provider. SITUATION OVERVIEW A rapidly growing $1.3B biopharma company with 12 drugs on the market and ongoing drug development, needed to find a new supplier for PV services.  As a result of the company’s rapid growth over the preceding 8 years, the incumbent supplier was unable to meet service level requirements creating a sizable business risk.  The client had increasing concerns about the incumbent’s capability to respond to audits in a timely manner; rapidly scale to support spikes in volumes; and support advanced analytics and insights. As a result, executives including the EVP of R&D, CFO and CEO approved a sourcing effort to find a new service supplier and technology platform. To lead the sourcing effort, the client brought in Dave Stowe, a member of the OnDemand Professional Network with deep pharmaceutical industry sourcing expertise to work with the VP of Patient Safety, scientists and the IT organization.  APPROACH The client created a core team with representatives from PV, IT and procurement...

Procurement Organization Redesign – Setting Up For Strategic Cost Savings Drive

A major industrial gas company’s North American Procurement Organization transformation journey highlights the importance of proper alignment to achieve significant and sustainable results. A major industrial gas company’s North American business aimed to significantly increase savings from their strategic procurement activities.  The company understood that in order to achieve their goals, they needed to re-align and optimize the Procurement Organization to fully harness its capabilities.  They hired a small team of consultants led by OnDemand Professional Network member Steve Strickman to significantly upgrade the function. Situation Overview: The company had a centralized transactional procurement team but lacked spend transparency and strategic sourcing skills.   Procurement was not seen as a value-added leader that could bring critical Sourcing and Cost Management expertise, which caused fragmented and localized execution of procurement activities across the company.  Driven by the new cost reduction mandate Senior Management’s goal was to upgrade Strategic Procurement across-the-board by building out a new organizational structure and strengthening its capabilities.  Approach: The Consulting Team first performed an assessment of the Procurement function, and the company graded poorly along seven high-level Procurement “success dimensions”:  Change readiness/willingnessStaff motivation and empowermentStructural alignmentSpend transparencyMeasurement and reportingBusiness process managementProcurement data capture and tools Understanding the current state was important in the successful re-design of the organization.  Among other things, the Team uncovered significant “Shadow Procurement” activity – procurement being executed by non-Procurement staff – that was causing significant downgrade in opportunity to save money and increased cost by excessive use of personnel resources (several dozen FTEs). The approach followed a proven concept – Current State Analysis/Gap Analysis/Future State Design across People, Process and Technology in...

Strategic Sourcing Can Help to Realign IT Cost Structure After Divestiture

SITUATION OVERVIEW The US arm of a Japanese multinational Consumer Electronics company required Strategic Sourcing support to tailor its centralized IT organization’s Service costs to match its new revenue structure after a key business unit (BU) exited the US market.  Due to the shared nature of the IT organization, initial IT cost reductions accompanying the BU exit were not proportional with the revenue reduction.  The situation caused a ‘stranded cost’ issue that impacted the remaining BUs profitability going-forward.  This issue was made more difficult by an IT expense allocation methodology that was overly complex. The company engaged Tony Raimundo, a member of the OnDemand Professional Network with Strategic Sourcing / IT Category Expertise and an extensive IT Operations background, to participate as a member of a steering committee with the CIO, CFO and representatives from the going forward BUs to address the ‘stranded cost’ issue.  The team was given 90 days to consider all options including outsourcing the IT function. DISCOVERY & EVALUATION After establishing a working team that included the CIO, the Finance team, and representatives from each BU, business requirements were defined and roles & responsibilities were communicated to the project team.  The team agreed that the following deliverables would be required. Articulation of a complete IT Service Catalog illustrating delivery costs for each serviceCommitments from BUs for IT Services & volumeDetailed Sourcing plan (including a detailed RFI document) to solicit proposals from IT Outsource (ITO) providers The team assembled internal & external data and analyzed IT spend for the previous 18 months clearly mapping relationships of costs to existing Services in the existing IT cost allocation...

Tail Spend Focus Can Deliver Significant Savings

Ever since Peter Drucker made his famous statement about procurement being the last frontier of finding corporate efficiency in 1982, companies of all sizes have embarked on implementing procurement enhancements as a way to control and reduce cost.  In nearly 50 years of procurement focus, one portion of vendor cost has gotten very little attention – Tail Spend, broadly speaking 20% of the overall spend that comes from 80% of vendors.  While Tail Spend is something that always will be present in the cost structure of any organization, below are some examples where Tail Spend represents inefficiency: Using local vendors for services when there are existing agreements with national vendors, e.g. housekeeping servicesUsing software services specifically for individual business functions when there are enterprise level services available, e.g. business intelligenceUsing services that are not required or are already provided by existing vendors, e.g. certifications, marketing research, project managementRogue spend, not approved under any budget Because of the relatively small amount of spend associated with any individual vendor, Tail Spend can escape attention from finance and procurement functions for a long time.  Paul Dhaliwal, a member of our OnDemand Professional Network has developed a systematic approach to identify suspect vendors within tail spend that may fit the criteria outlined above. This approach enables rapid identification of these vendors and take appropriate action in collaboration with individual spend owners.  Typical disposition off these vendors includes immediate shut-off of their services, transition of their services to existing vendors, or consolidation with a national vendor.  Tail Spend initiatives can yield cost reduction totaling 2% – 5% of overall total indirect cost and can...