PA research confirms that traditional approaches to reducing the total cost of procurement leave 75% of the prize on the table. PA’s approach addresses the deficiencies inherent in strategic sourcing and category management by extending the thinking to embrace organisational competencies and enablers. As result the benefit realised is not only substantial but also sustainable.
Case studies
Leisure services company - Analysing purchasing spend and identifying cost saving opportunities
The company had pursued a focused policy of expanding its two operating divisions through organic growth and a steady acquisition programme incorporating both land-based and e-commerce operations. The scope of the sourcing review project was to analyse the purchasing spend of a particular division and identify cost-saving opportunities.
PA benchmarked each division’s purchasing cost as a percentage of total spend to identify areas for improvements. We also analysed the average value per ‘capitalised spend’ and ‘non-capitalised spend’ and were able to identify substantial opportunities for saving.
BP - Creating a new data warehouse system based on Internet technology
PA helped BP create a data warehouse system for optimising worldwide procurement. Oyster allows BP to pursue its commitment to devoted decision-making, yet at the same time sharing knowledge and information to obtain the benefits of aggregating purchases across the organisation. With improved co-ordination on purchasing, new and beneficial supplier arrangements, closer teamwork and global reach, the impact of the database solution on BP’s bottom line is substantial.
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Devonport Management Limited - Establishing a commercial procurement organisation to optimise the supply chain and reduce costs
Devonport Management Ltd (DML) was established to operate Devonport Royal Dockyard in response to the challenges facing this strategic facility during the late 1980s. The principal activity of the DML Group is submarine and warship refit and maintenance, together with an increasing role in warship design and construction. DML recognised that, in order to maintain its customer commitment to reduce the cost and timescale of maintenance and refit activity (and thereby avoid contractual penalties), a major step change in procurement practice was required.
Subsequently, over a period of five years, DML has established a commercial procurement function with professional leadership at a senior level. PA Consulting Group has supported this process through a number of discrete consultancy engagements including:
- procurement strategy
- organisational change
- supplier development
- control and monitoring systems.
The overall result has been demonstrable benefit to the organisation, its customers and suppliers, together with a measured and monitored procurement cost reduction.
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