Background

The company, having set a goal to lower its costs by EUR 4.5 million, managed to save EUR 2.8 million on its own. Mantec was then hired to help it achieve the remaining reduction of EUR 1.7 million.

Using techniques such as benchmarking, work studies and high level process mapping, Mantec identified substantial potential savings in purchasing methods and in service/ maintenance productivity.

Implementation

Based on the results of the initial analysis, Mantec and the client jointly started work on a programme of change which included the following subprojects:

• implementation of a new, better controlled purchasing process more closely aligned to market requirements;
• introduction of purchasing groups (decentralised purchasing departments) able to take a holistic view of purchases as well as obtaining the best possible prices;
• development of a handbook for the entire purchasing process, containing routines, templates and guides; and
• development of a management control system to better measure the effect of the work done in purchasing. This enabled management to follow up on negotiating results, and whether the organisation was using the established agreements, invoices etc.

It was important not only to focus on purchasing and the purchasing process, but also to take into account how these products and services were used throughout the organisation. For example, by optimising and basing resources and working methods on actual needs, service/maintenance productivity was also improved.

Result

The key benefit to the client was that the set goal of reducing costs by a further EUR 1.7 million was attained. The project ROI was 300%. Apart from the direct cost savings, the most significant achievement of the project was to institute behavioral change throughout the organisation:

• purchasing is today a management issue with clear goals and an appropriate reporting system;
• a systematic approach to working with purchasing has also created increased cost awareness within the organisation; and
• supplier groups which take a holistic view have the knowledge about the right price as well as driving an active dialogue with suppliers.

In summary, the overall outcome after working through the project is a more efficient organisation better adapted to the needs of the company.

Background

The company, part of a multinational group, employs approximately 10,000 people and has a turnover of EUR 3 billion. An initial analysis carried out by Mantec in one of three business areas indicated that significant savings were possible in purchasing because:

• long-term contracts and relationships with very low activity and unclear ownership led to price increases over time;
• the company had not exercised its purchasing power and instead used many suppliers of the same product or service, often at high prices;
• the company carried out no overview or scrutiny of the providers with which it had agreements, and this led to there being a large number of suppliers on the books;
• unclear roles and responsibilities meant that nobody was responsible for monitoring crucial factors such as price developments, how purchases were distributed, utility costs, supplier performance; and
• more focus was placed on getting the job done than on getting a good price.

Implementation

The project, conducted jointly by Mantec and the client, took place over eight months and comprised three main steps.

Firstly, a systematic review of all purchases was carried out to determine the pattern of purchases (spend analysis) and other data such as volumes, prices, and detail of current contracts.

Secondly, based on the analysis of spend, purchasing teams conducted in-depth analyses and drew up specific action plans relating to savings in both strategic purchases (creating value) and operational purchases (realised value).

Thirdly, contracts were renegotiated and implemented to finally realise procurement savings.

Results

The main benefits of the project to the client have been:

• greatly reduced prices;
• long-term contracts with preferred suppliers and transparent estimates;
• clear sourcing strategies; and
• fewer suppliers for larger volumes.

Overall, the project exceeded its objectives and resulted in an ROI of 500%.