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| Major logistics company - rapid sourcing |
Context / Scope of project
Our client was a major logistics company that had performed consistently over the last 5 years, but had seen its procurement spend rising faster than its revenue. PIP was engaged to address this imbalance by delivering rapid savings for the client before the company embarked on a major transformation program..
Client achieved:
- $10.3 million in annual savings across two areas - $5.8 million in negotiated benefits and $4.5 million in benefits resulting from tenders jointly worked on. Total savings over a 3 year period were expected to be over $25 million
- Over 6.5% or $5.3 million in savings achieved on 30 non-strategic contracts with annual spend of $80 million
- Additional savings of over $5 million on one of Australia’s largest fuel contracts (over $260 million annually) that had been aggressively sourced and managed for the last 3 years
- Put in place key operational changes and measures to drive further savings in short and medium term through the use of best value suppliers and increase spend management
- Improved strategic sourcing and negotiation skills across the business and embedded a stronger cost management focus.
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What we did:
The work was lead by a PIP and client team that reported to the company CFO. The team undertook the following:
- Developed analytical and sourcing tools that supported a comprehensive negotiation strategy for one of Australia’s largest fuel contracts
- Broke down spend data to determine suppliers who would be targeted as part of the rapid sourcing program. Generally strategic suppliers were excluded, as were suppliers where contracts had been recently or would soon be tendered
- Worked with stakeholders across the business to ensure a consistent message was delivered from all stakeholders to suppliers and to develop an initial savings strategy for each targeted supplier
- Developed targeted, fact-based negotiation packs for presenting price reduction / savings case to the suppliers. Negotiation packs included, for example, a formal letter from the CFO, comprehensive negotiation packs, scripted negotiations via teleconference and specific pricing guidance files (particularly as part of tenders)
- Led over 140 supplier negotiations that focused on big, fast results and present-year impact
- Completed file notes and saving forms for each supplier to facilitate ongoing relationship and lock in savings achieved
- PIP team designed and led training for the Procurement group to generally improve negotiation and tender skills.
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