Procurement Strategy Development for Humes, a Fletcher company

Starting with a blank sheet of paper, procurement strategy development at Humes has come a long way in a short space of time - and generated significant value.

The catalyst for a new strategy was Paul Clent, who moved from heading the company’s IT function into leading the Supply Chain function. Seeking ways to increase his knowledge, Paul met Strategic Sourcing’s Bernie Diver, who is also the facilitator of the University of Auckland’s procurement course. On Bernie’s recommendation, Humes undertook a procurement audit, to determine capability in the organisation.

It was a revelation. The company had always been pushed hard by its customers to provide the best in terms of products, supply and price. Yet it hadn’t really pushed back in the same way on its suppliers. Strategic Sourcing provided the structure and methodology to do so.

The audit categorised all of the company’s direct spend, and identified some “low hanging fruit” that was ripe for change. The first category to be developed was freight. A transparent targeted negotiation process led to a reduction from multiple carriers to one, and an agreement that has generated at least $400,000 annual cost savings.

Though national supply is now managed by a single carrier, effectively all of the existing carriers have been retained in the transportation of a large and fragile product. It means that Humes has gained a better way to manage its freight relationships, using suppliers it already knew and trusted, while achieving significant savings on the freight rate card.

The same structure and methodology is now being rolled out to other categories. The next target is third-party logistics, and initial savings estimated in the audit of $100,000 annually are more likely to be around $300,000. The intention is not to squeeze suppliers into non-sustainable business models. The intention is to grow Humes’ business without adding cost – if it doesn’t tap into suppliers to support it to win new business, then both lose out.

While the best price is important - good service and delivery create further value. The wider benefit of strategic procurement is to form more effective collaboration with suppliers that supports innovation.

The audit report itself continues to generate value, as the company progresses in its understanding of how to use strategic procurement. Humes also values greatly the ability to work directly with Bernie Diver, tapping into his knowledge and experience in both the corporate and government sectors. Strategic Sourcing is the right size of organisation to partner with – small enough to have key personnel involved on a daily basis, but large enough to bring a wide range of technical resources to the project at hand.

Key benefits
The audit: this comprehensive report continues to shed fresh insights on the procurement process, as the company builds its capability.

The structure and methodology: it has application across all procurement categories and provides the framework for effective relationship management.

Competitive advantage: the collaborative approach with suppliers is enabling the company to offer innovation in its solutions for customers.

Benchmarking: in working with Bernie Diver, the company has tapped a wealth of knowledge about how other organisations manage procurement, and win big business.

© 2016 Strategic Sourcing Consultancy Ltd. All Rights Reserved. Site By Carbon Media