• Client is a national buying and distribution company, situated in the Midlands.
• Had a fragmented procurement team, looking at specific categories within their supply chain.
• We produced a saving of £1.5 million in the first year.
• We helped implement new procedures to gain additional delivery and retrospective discounts on order quantities.
• Overhead costs are now being reviewed to leverage numerous buying points.
• Now working with tier one suppliers in identifying savings.
The client is a national buying consortium based in the Midlands with 19 member companies with warehousing, distribution and large national / international sales infrastructure. The client has multiple levels of buying undertaken across the organisation which in reality was fractured and uncoordinated. As a consequence contracts on specific categories had been not reviewed centrally.
Although the client had procurement functionality, they were keen to engage external advice and to use expertise to review specific buying categories. Both of these categories had over £8 million of spend. The relationships with the suppliers were good but verged on the boundary of familiarity rather than being commercially driven. In each case the client believed from market knowledge and sound product knowledge that savings of 10% could be made.
In order for the scale of expenditure and product range to be confirmed we undertook a complete review of on and off line expenditure. As part of the review we discussed not only warehousing and delivery requirements but also future client demands for product not currently stocked. By understanding future pipeline we could ensure that any solution was “future proofed”.
By reviewing product lines and stock-holding we were able to decrease stock-holding levels and implement new order procedures and stock management systems. This has resulted in reducing labour costs and released areas of warehousing for alternative use. In some cases this has been leased to other companies in the area producing additional income stream.
Not only did we tender the supply by product but also by region to ensure that all potential savings could be realised. As part of this exercise we identified new entrants to the market and re-negotiated existing delivery conditions. We were able to negotiate larger discount deals by refining delivery quantities and retrospective discounts.
Using the data from each of the members that we collated and formatted, we were able to identify a disparity in the pricing structure from business to business. We were also able to produce a core and non-core product listing, and leverage volume requirements across the company and therefore improve pricing efficiency.
Following a period of rationalisation on both supplier and product we were able to deliver savings of £927k against a total spend of £4 million (23.1%) and £611k against a spend of £3 million (20.1%).
We are now actively engaged in identifying overhead cost savings for the group as each of the members again operates independently. On first pass we have already identified large savings in telecoms and insurance as well as fleet management.
As a by-product of our work we are now engaged with some of the first tier suppliers in identifying savings for their organisations.
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With our knowledge of the cost markets & bench-marking modules we can review the cost bases of both your current & newly acquired company to ensure their combined buying power can enhance your cost base.
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While hiring a cost consultant has many benefits to your company, they are not to be confused with a cost broker. Although they have some similarities and work in the same sector, they are not the same thing.