Delivering bottom-line savings through strategic sourcing
One of the largest European printing companies was struggling with low profitability and rising input costs. Having recently made a number of acquisitions, the client realised that procurement practices around the group varied and they were not fully leveraging their buying power.
The client had tried to improve purchasing effectiveness working with a major management consultancy, but with limited success. What was needed now was a new, more practical approach that delivered real savings.
What we did
The first stage was to review purchasing practices and processes across the group and identify what was working well and where improvements could be made. Through a series of facilitated interventions and bringing in external best practice, we established a new standard procurement process with associated performance indicators. This was achieved by working closely with all the current procurement staff so that they participated in the development of the new processes and took ownership of it.
The second stage was to carry out a complete review of all purchasing and identify those spend categories where real savings could be made. We identified six key areas of spend that could be attacked, including ink, paper, transport, and manufacturing consumables.
Through a comprehensive strategic sourcing process that involved key users as well as the procurement staff, we established a competitive supplier market for each category. The suppliers were encouraged to treat this as a long-term partnership opportunity and submitted comprehensive new supply tenders. We analysed these for the client and developed the negotiation strategy to be adopted for each potential supplier. We then trained and coached the client through detailed negotiations to establish the new supply contracts.
The result was an average 15% saving in cost against existing supply arrangements, saving the client some £10 million a year. This helped to restore the company to profitability, and it was able to address further spend opportunities using the processes and tools that we provided.