Our client is a major player in the defence manufacturing industry with a global presence. The company operates in a highly competitive market and is under constant pressure to optimise its procurement processes and reduce costs without compromising on quality.The client engaged us to conduct a detailed spend analysis process and identify opportunities for cost savings.
The objectives of the project were:
- To validate and categorise the client's supplier spend data;
- To prioritise cost-saving opportunities and create a roadmap for future sourcing activity;
- To explain how we would deliver and optimise the category procurement for these potential cost-saving projects; and To develop a plan for capturing and sustaining value achieved on these projects.
Once we received the supplier spend data extract from our client’s financial system, our team of experts quickly got to work on the data. We used a range of tools and techniques to cleanse and validate the data to get this into a workable format ready for categorisation. We applied our own categorisation structure to the data which presented a different perspective on the supplier spend, allowing for an aggregation of similar spend area categories.
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 with suppliers across the data. We used a combination of spend segmentation, supplier profiling, and market analysis to identify opportunities for optimisation and consolidation.
This spend analysis and category experience was combined to produce a comprehensive spend analysis report.The report was split into 3 main sections. These focused on:
- Investigating, categorising, and prioritising the opportunities;
- Optimising category procurement; and
- Capture and sustain value.
The investigating, categorising, and prioritising opportunities section contained a full breakdown of analysis on the supplier spend data. This included an analysis of the total spend, an analysis and review of each category spend, and an investigation into the tail end spend.
The spend analysis and category examination provided a basis for identifying a list of projects for potential cost saving opportunities. To prioritise these cost saving opportunities, we developed a sourcing activity matrix that provided a visual representation of the potential projects for cost savings delivery. This matrix provided a prioritised opportunity roadmap for future sourcing activity.
The optimising category procurement section explained to the client how we would deliver and optimise the category procurement for the potential cost saving opportunities. This talked the client through our own "Sourcery Approach". This provides a structured approach from confirming the business requirements, to developing the sourcing strategy, through to implementing the new supplier agreement in order to realise the project benefits. It ensures that all aspects of the sourcing cycle are completed in a consistent and best practice manner across the organisation, whilst confirming that the business requirement and sourcing strategy are fully understood prior to approaching the market to negotiate improved commercial terms.
The final section of the report focused on capturing and sustaining value. This outlined our approach for ensuring that the value gained from the optimising category procurement phase would not be lost. We explained to the client how we would achieve this through contract management, supplier relationship management, category management, spend compliance management, and training and development processes.
The client was impressed with our methodology and approach, along with the level of detail which the report contained in an easily digestible and understandable format. Feedback focused on how they enjoyed being taken on a journey from initially having a large spreadsheet full of data through to ending with a report which contained a full breakdown of analysis, a roadmap for future cost saving opportunities, and a detailed plan for how to deliver these cost saving opportunities to capture and sustain value for the long run.