Achieving Cost Savings and Improving Procurement Practices at a Food and Beverages company
The client faced a sudden gap in the procurement role for professional services. Insufficient progress had been made on objectives of savings and cash generation. The main objectives were to achieve cost savings, ensure compliance with audit requirements, and develop a new strategy.
Objective and deliverable
Achieve savings and cash targets within the reporting year that was well under way.
- There was no plan in place to achieve the savings targets that had been pushed forward by previous procurement professionals.
- Budget holders were not involving the Procurement team in decisions.
- Contracts with vendors had not been signed for over a year due to a dispute over payment terms.
- Key stakeholders were not supportive of the target of the procurement department.
- 70% of spend was happening without procurement involvement or procurement negotiated and registered contracts.
- Identify key focus areas and set up a work list to achieve savings.
- Connect with the business and demonstrated expertise in order to get involved in project negotiations and achieve the savings targets. This resulted in the opportunity to negotiate discounts and improvements, resulting in the achievement of savings target within 6 months.
- To achieve the ambitious savings agenda of procurment department we focused on increasing spend under involvement. We conducted a Voice of Customer (VOC) assessment by conducting 47 in-depth interviews with key stakeholders to gather insights on the current state of procurement practices. Based on these insights, we proposed a new sourcing strategy that focused on strong vendor management, sharing best practices, and optimal spend allocation to drive down costs through increased transparency on price performance and expertise. This strategy was well received by stakeholders.
- We also began structural improvements by conducting a VOC assessment for professional services and developing key CTQ, CTD, and CTC for future vendor engagements.
Key learnings and solution
- Key stakeholder involvement is essential for any savings and cash generation results.
- Take time to engage with stakeholders and agree on an approach before acting.
- We developed a solid approach to finalise a new strategy that was based on input from key stakeholders and resulted in improved insights and a more effective approach.
- We achieved the cost savings objective within 6 months.
- The procurement organization’s visibility was improved.