Procurement & Spend Analysis for a Household Product Distributor
Procurement Analysis
Challenge / Requirement
Following a recent incident with a trusted supplier not performing to requirements and pushing lead times out excessively with limited notice. A relatively small business providing household products directly to consumers and social landlords were unsure whether their supply chain was operating efficiently providing them with value for money and minimising potential supply risks. Following recent incidents and changes in their marketplace they were seeking reassurance of their competitiveness.
Process
SCB Procurement Solutions conducted an in-depth spend analysis using Spend Cube profiling, reviewing all purchasing activity within the business (both direct and indirect), data provided was interrogated and categorised to provide an accurate understanding of individual product/service and supplier performance.
The results of the analysis where presented to the client highlighting the current effectiveness of the companies supply chain and proposing specific projects of paths which would reduce cost and risk while increasing process efficiencies.
Outcome
Numerous cost reduction projects were suggested and conducted ranging from short term supplier negotiations through to moving supply of key product ranges to approved UK distributors to take advantage of their pre-existing Low-Cost Country (LCC) market routes.
Benefits
The net result of these cost reduction exercises was to provide a sustained annual cost saving of £200,000
Two key projects to address current supplier issues:
- Supplier one was the only supplier for a specific portfolio of products with no visible alternative supplier available had been missing delivery dates, increasing lead times and costs systematically for an extended period. Following a site audit, it was felt that the supplier posed a significant risk to the business and a full exit strategy was implemented and the supplier was removed. A strategy of utilising 3 different suppliers to undertake pre-existing contracts and new product introduction had the net effect of removing a potential high-level risk to the business, reduce cost by 5% and introduce new products to a stagnant range.
- Supplier two notified the company of an intended price increase to cover their ongoing cost increases which had recently placed the supplier in a position where certain products were no longer profitable. Through discussions with the supplier a smaller cost increase was agreed and a systematic review of their processes and suppliers was supported in an effort to assist in reducing the cost burden on the supplier.
