Corporate margins are highly exposed to shifts in raw material prices, global competition and economic stability. In recessionary times, access to working capital financing can be both scarce and expensive. Firms that have large procurement costs are highly exposed in these scenarios, especially in industries where purchasing represents up to 80 percent of total costs. Purchasing is therefore one of the key strategic areas for generating competitive advantage and value creation.
In order to realise corporate savings and growth targets, numerous strategic and operational levers need to be applied in the area of procurement. For example, globalisation has led to increasingly complex supply chains and cost structures, which require corporations to rethink their existing processes and relationships. Future success depends on the introduction of new concepts for efficient procurement.
Lansdowne Consulting is a leader in delivering significant, measurable savings and sustainable strategic sourcing practices. One of our key strengths is helping companies achieve aggressive targets within complex organizational structures and procurement environments.
We offer highly experienced and tailored teams of experts to deliver successful projects. Our approach is based on close collaboration with the client team from the initial definition of objectives to final implementation. In addition, we leverage our global presence of international Lansdowne offices and emerging market partner offices to support worldwide tendering and supplier management processes.
Lansdowne’s success is based not only on the high standards of our consulting teams and approach, but also on our variable fee models that share the risks and rewards of projects with our clients. Honesty, clarity and close collaboration are the prerequisites for success. In this way we define ourselves as entrepreneurs and real partners for our clients.
Approach
Our Integrated Spend Management Framework covers all key procurement and spend processes. Based on our deep insight into the individual processes, we evaluate potential initiatives to optimise our clients’ cost base, organization and overall processes in the areas of:
• Strategic and Operational Procurement
• Supply Chain Management / Logistics
• Working Capital Optimization
The Integrated Spend Management Framework begins at the core of an organisation with its Spend and Supply Strategy, which covers aspects such as in- and out-sourcing, off-shoring, and shared services strategies. This core strategy then shapes the development of the business’s Purchasing Organisation and Processes as well as Change Management and human resource strategies needed to meet its goals.
Surrounding this core area are four key elements that drive the continuous improvement and efficiency of an organisation’s spend management performance:
Spend Transparency and Savings Diagnostic
Continuous cost improvement depends on spend transparency and identifying new savings opportunities. In order to achieve spend transparency, all cost and spend data must be extracted from existing systems (automatically or manually). This raw data is then aggregated and segmented with the support of interviews and industry benchmarks.
The basis for the diagnostic is the spend cube. The spend cube classifies all costs by commodity and service groups, location and supplier. Together with the client we derive the relevant segments and determine their savings potential. In order to accelerate and sustain this process, Lansdowne offers clients a unique spend transparency software to fast track savings realisation and provide ongoing support.
Strategic Sourcing & Working Capital Management
Lansdowne works onsite with clients to achieve measurable and sustainable savings through the strategic sourcing of single or multiple categories and services. Lansdowne utilises proven methodologies to achieve exceptional results. These include sourcing strategy development, tendering and strategic negotiations, which ensure successful implementation and savings realisation.
A critical success factor in any strategic sourcing engagement is the identification and implementation of the relevant optimisation levers. Our team utilises a selection of buying, process and technical levers to achieve optimal results for our clients. This multiple lever approach means that many technology and manufacturing companies that have already carried out traditional purchasing cost reduction projects in the past can still achieve further savings.
Moreover, additional approaches to increase liquidity can be assessed and implemented, such as optimising payment terms or inventory and analysing outsourcing opportunities:
Spend Control & Compliance Management
Large investments in time and money to develop a cost competitive supply base can be nullified if these contracts are not properly exploited in the organisation. Advanced spend control & compliance management tools and processes can be used to ensure that the organisation extracts the full benefits from its contracts without placing bureaucratic burdens on staff. In addition, these tools and processes form the basis for systematic supplier management, which is critical for the development of a world-class supply base
Operational Procurement and Logistics
Operational procurement covers the day-to-day processes such as ordering, payment, etc. The perceived low ‘strategic’ value of these activities often leaves them off the management control radar. It is for this very reason that they often offer significant savings opportunities in the ordering, invoicing and payment processes and logistics. Therefore, the analysis of these processes is an important tool to improve working capital and efficiency
Accelerated Turnaround Roadmap
In the broader context of turnaround management or restructuring, our Accelerated Turnaround framework targets areas where cash may be quickly generated without negatively impacting organisational and cultural values, such as innovation or talent development.
Below is a selection of services that we offer our clients in each segment of the Integrated Spend Management Framework:
| Element | Selected Lansdowne services |
|---|---|
| Spend and Supply Strategy | • Supply strategy development: supplier segmentation, service level agreements (SLAs), key performance indicators (KPIs), balanced scorecards • In- and outsourcing strategies (on system and module level) • Off-shoring viability assessments & strategies • Shared Services strategy • Benchmarking exercises |
| Purchasing Organization and Processes | • Purchasing organization design or redesign • Organizational & process handbook development |
| Change Management & Training | • Change management programme design and execution (incl. training) • Communication planning • Tailored training programme |
| Spend Transparency | • Dynamic spend transparency • Data mining: category segmentation, sourcing cube, initial spend analyses, fraud detection • Holistic analysis and assessment of potential improvements and savings in procurement and implementation planning |
| Strategic Sourcing | • Strategic procurement of individual categories or services through the relevant optimization lever • Overarching control programmes to reduce procurement costs |
| Spend Control and Compliance Management | • Development and implementation of sustainable procurement control • Supplier management • Supplier development |
| Operational Procurement & Working Capital Optimisation | • Operational procurement re-engineering • Working capital optimisation (e.g. inventory management, payment terms and process) • Transport and logistics optimisation |
Recent Lansdowne publication:
The Supply Manager (only available in German)
Topic: Supplier Integration – Communication as a Relationship Tool
Author: Mr. Tobias Hofmann, Managing Partner Lansdowne Consulting GmbH
Editor: Management Circle (www.managementcircle.de)
Case Studies
Strategic Sourcing
Case Study: Leading UK hotel and restaurant group required rapid cash savings to offset significant drop in top line revenues due to 2008/09 financial crisis. Utilised numerous strategic levers such as volume bundling, supplier consolidation, downgrade/alternation of specifications (i.e. fit for purpose), outsouring and supply chain redesign to achieve over €25m in annualised savings.
Emerging Procurement Market Sourcing
Case Study: Achieved €33m savings (11%) by implementing a Global Sourcing Strategy, with focus on Eastern Europe, for a leading white goods manufacturer. Key driver for savings was the significant enlargement of the client‘s EPM vendor base, with more than 100 suppliers selected from 12 different countries
Logistics Sourcing
Case Study: Delivered a €24m (8%) annual save by optimising road transport processes for leading player in the process industry. Key activities were to reduce supply base from 1.500 to ca. 600 logistics partners and define and implement a new centralised organisation to coordinate local demand at a European level
MRO Procurement
Case Study: Delivered €2,5m (12,5%) reduction in annual MRO (maintenance, repairs and operations) spend and embedded improved procurement structures and processes for leading player in the aluminium industry. This included the introduction of spend control & compliance management tools and processes to ensure extraction of the full benefits from the unified, national & international contracts
Redesign to Cost
Case Study: Carried out a ‘redesign to cost’ exercise for a leading logistics systems and equipment manufacturer and reduced the cost of a high-tech forklift cabin module by 15%. Key levers to achieve the savings were the redesigned cabin and in-sourcing cheaper components and processes from more competitive suppliers
Retail Returns Management
Case Study: Utilised a cross-functional client/consultant team to design and implement best practice returns handling processes for a leading UK retailer. Implemented successful change management programme to ensure Head Office and Operations buy-in and reduced the company’s net returns costs by 75%.
Supply Chain Review
Case Study: Conducted a supply chain review for a leading UK book retailer to increase staff customer-facing time and improve overall productivity. Analysed ‘as is’ store handling and IT processes, designed ‘to be’ processes’ and developed business case to support required changes. Plan successfully implemented by in-house team.
Reverse Logistics
Case Study: Developed the business case and implementation plan for a ‘closed loop’ reverse logistics chain for a major UK retailer. Successfully managed the end-to-end process from the systems architecture to implementation and delivered the project on time and on budget.