Case study: Optimized procurement spend

BRIDGEi2i helps an Australian specialist services company to identify opportunities of optimizing procurement costs around services and goods.

Business Challenge

A specialist service provider engaged in the business of maintanence, repair and overhaul of large power plants, industrial equipment and government projects in Australia wanted to understand opportunities to reduce their huge services and products procurement costs as a part of a larger initiative to control indirect procurement budget. Current procurement was ad-hoc and largely dependent on regional requirements. The supplier base was too large to have a systemic cost management process.

BRIDGEi2i Solution

BRIDGEi2i employed 3 prong strategy to identify preferred suppliers, analyze spend patterns and recommend contracting and negotiation strategies unique to the category and supplier.

Supplier concentration and category analysis

1. Analyzed recency, frequency and monetary aspects of relationship with each supplier for specific category
2. Help identify potential preferred supplier and estimate magnitude of spend consolidation possible with
regional diversity and other constraints

Analyzing spend and rate variation

1. Identify aberrations in pricing across region for the same category
2. Identify large variances in supplier-wise rate card for the same category
3. Identify perceptable changes in period-wise rates for the preferred suppliers

Contracting Strategy

Two-pronged negotiation approach

1. Preferred suppliers with large variances in region-wise and within region pricing were encouraged to standardize a discounted rate card in exchange for a larger share-of-wallet
2. Categories where clear-winner-supplier exists along with a long tail of suppliers are ideal for contracting
3. Contract term was suggested with a YoY deflation of spend

Business Impact

A focused approach to systematically identify and contract with preferred suppliers and engage them in a strategic manner demonstrated significant cost optimization feasibility across categories. The impact had an immediate component with rate standardization; it also ensured a roadmap for further gradual reduction of cost with YoY cost reduction contractual terms.

About BRIDGEi2i

BRIDGEi2i is an analytics solutions company partnering with businesses globally, helping them achieve accelerated outcome harnessing the power of data. BRIDGEi2i helps companies to BRIDGE the gap between INFORMATION, INSIGHT and IMPACT in their journey to institutionalize data driven decisions across the enterprise.