Case Study #3
LARGE FACILTY MANAGEMENT COMPANY: $235 Million in F&B Sales Revenues and $48 Million in Total Purchasing Spend
Company is a large decentralized organization with multiple profit centers. Current supply chain strategy is to let each location manage purchasing activities to customize offerings to local preferences while controlling costs with competitive bids. Realizing the limits of such a strategy, CFO and newly hired Senior Vice President recruit OPTIMBUY to develop and implement a plan to reorganize supply chain function and accelerate cost reductions and savings.
OPTIMBUY developed a broad diagnosis process. Over a 3 month period we analyzed company organization, suppliers (characteristics, negotiation process, performance assessment, logistics and contracts), financial performance, service levels and systems for main profit centers.
Conclusions were presented to key stakeholders and included: complex organization lacking clear responsibilities, multiple suppliers sometimes covering multiple profit centers with different prices and terms, lack of consistent financial performance, more focused on pleasing internal customers than bringing real value, inconsistency of monitoring systems and need for a small central organization.
A new strategy and action plans are proposed based on a “5 step approach” customized based on each profit center situation (purchasing organization, needs and volumes). Once approved, implementation is conducted over a 6 month period.
Policy and procedures manuals are simplified and communicated to locations.
Responsibilities & accountabilities are redefined as well as relationships between profit centers and central organization.
Best practices are shared through a formalized Supply Chain intranet forum. A comprehensive training program is developed and delivered by OPTIMBUY. A plan to rationalize and consolidate suppliers is developed, some of the categories are assigned to profit centers' purchasing leaders and negotiations are conducted under OPTIMBUY guidance.
Financial standards are implemented and a scorecard monitoring compliance to programs is designed by / for Supply Chain team members. Compliance targets are set at the corporate and profit centers levels fostering discipline and collaboration. The purchase of a new IT platform is approved to harmonize tracking and control systems. OPTIMBUY is asked to further assist the management of the new system and the central Team.
A new Purchasing spirit is born, with simplified processes and more efficient support, improving end-users’ satisfaction.
The consolidation of major distributors / manufacturers leads to set-up programs and cost savings generating annual impact of $2.8 Million. Product rationalization (reducing SKUs from 14,000 to 7,000) will generate additional costs reduction.
The involvement and commitment of the entire management team made this process a success story for many fiscal years to come.
OPTIMBUY impact: Total savings: $2.8 Million translating into 5.4% of Total Purchasing spend.