Within New Zealand, our client is an exemplar in best practices, with procurement a strategic pillar of the organisation. However, it still has its supply-chain challenges – particularly in access to capable talent when it’s needed and of the right quality. Strategic Sourcing has been able to meet this need on a number of occasions over the past 18 months. Recently, when a key member of the management team was transferred to Australia, a “fill-in manager” was provided until a replacement could be employed. The need was to lead a team of five procurement specialists, while at the same time being part of a major logistical exercise as the company transitioned into new premises. It required a combination of good management skills as well as deep technical understanding of the procurement system in place. In addition to maintaining the team’s direction, the contractor brought a fresh perspective and was able to identify opportunities for change. At the end of the contract period, communications, processes and supplier performance were all improved. By targeting areas of weakness, and setting priorities, the contractor achieved the kind of focus that can be a difficult for an employee who is immersed in day-to-day management. Other projects have included delivery of KPI reports, and a review of internal structure post an ERP transition. A procurement-led company needs to partner with suppliers who understand procurement processes as well as it does. That’s where the value lies in the relationship with Strategic Sourcing. They easily fit into the business. KEY BENEFITS: Procurement understanding provides a good fit with the business. Process review and knowledge transfer.
RFP AND BID MANAGEMENT
When a large US-based aircraft manufacturer resolved to outsource parts marketing and logistics for one of its components, our client was presented with an opportunity to bid for this $50 million contract. The US company required the successful service provider to purchase its existing parts inventory and manage the ongoing supply. Though it had no doubts about its capability to provide the service, the New Zealand company had no experience in the management of a large-scale RFP process involving a major global company, and largely unknown global competitors. It recognised that time was its biggest unknown, and it was most at risk if it could not manage the process effectively. Analysis and assembly of a vast amount of data required to support the RFP could take a year. It was time the company did not have, when it already had a core business to operate, and there was a two-month deadline on the process. Our client knew it needed help. But in investing in consultancy support, the company was not just seeking a contractor for work it could do itself if it had the resources. It wanted to invest in a “Ferrari” – a partner that it was sure could get it first across the line. The process began with an indepth planning session with key management. The outcome of this was a clear understanding within the group of the company’s strategic position in relation to the competition, and the negotiation strategies that needed substantiation. Over a six-week period, we developed the data necessary to build a comprehensive RFP that in the end was far ahead of the competitors. Indeed, the US company told our client that it was astonished with the depth and quality of the information we had presented. For every criteria, the RFP response detailed not just the specific operational processes that would support the desired outcome, but at a broader level, how its HR programmes, health and safety management, and corporate values, would add to the overall service quality. Strategic Sourcing sold the company as a service provider it simply couldn’t turn down. For the client, enlisting our support was a worthwhile investment that is paying off in a far greater way than initial expectations. KEY BENEFITS: The quality of its process: Our client became the technical information provider, we took away all responsibility for research and analysis. All information – and learnings - were documented. The speed of the process: Preparation of the RFP took six weeks – it would have taken the company 12 months to manage it itself. The depth of analysis around the offer price for the inventory: We crunched a range of “unclean” data and at the end of the process the company clearly understood where the value lay. That made our client a much better negotiator when the time came to agree the price for the inventory. Understanding of the company’s business and strategic intent: Winning the contract has added a $50 million revenue stream. An additional benefit comes in the flow of US dollars into the business. The company is not just making a profit out of the parts, the wider business now has a lot more options in how it manages foreign exchange.
PROCUREMENT STRATEGY DEVELOPMENT
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.
OPS MANAGEMENT & SUPPLY CHAIN OPTMISATION
Fast growth brings a set of challenges that few organisations will have the management capacity to cope with. There are simply too many priorities for the leadership team to contend with. That is often when the use of Strategic Sourcing can have huge value – so long as transfer of knowledge is effective, and far-reaching. It’s simply not enough to deliver a new methodology, or technology. As a client, you want to work with advisers who have the ability to support your organisation to use and maximise the new approach. Working with Strategic Sourcing, we have definitely had that depth of service. Compared with other consultancies, they are “roll up their sleeves” people, who, having agreed with us on the outcomes, work alongside our staff to get the job done. Argenta was established four years ago. We research and develop animal health remedies, and provide contract manufacturing for animal health products, for clients all over the world. We inherited processes and a culture from our previous owner, a large multinational, which have become increasingly less relevant in our evolution as a smaller, entrepreneurial enterprise. We have welcomed the knowledge, and the tools, that Strategic Sourcing has introduced to enable change in the business. In setting a budget for a year we knew was going to be hard for the global economy, a critical step was to improve our sales and operational forecasting. We needed a system that enabled departmental managers to set and manage budgets based on forecasts they generated. In the past, the financial team would have done that for them, and it’s not a good thing, because it doesn’t encourage them to own the numbers. As a result of this initiative, we now have a group of leaders who can manage their departments like they are their own businesses. In particular, the knowledge transfer around the use of Excel has been outstanding. We have set 12-month rolling forecasts and agreed KPIs, and we report against those monthly. It has added enormous value in the way we do forecasts for sales and production, which is a critical aspect of the business. In the supply chain area, Strategic Sourcing did a review and helped us realise we didn’t have the right resources to manage a strategic solution. We have since recruited a highly skilled procurement manager, and are systematically establishing new supplier contracts. Using the structure that Strategic Sourcing recommended, we have generated savings of at least 10% in every supply category. KEY BENEFITS - The supply chain review: clarified the resources we needed. Supply chain structure: achieved at least 10% savings with every supply contract that has been established. Sales and Operational Forecasts: we now have a planning process that has added depth and rigour to the management of our business. New skills: managers are more accountable for their numbers. Master data: we better understand what to measure, and we have the tools to measure it.