example of Impact - OPERATIONAL EFFICIENCY / EFFECTIVENESS
Transforming procurementdetails
Client background and situation:
Private equity owned company
Private equity owned company
Pressure to rapidly improve EBITDA
Pressure to rapidly improve EBITDA
Procurement often overlooked area of opportunity - can represent 2/3rds of total cost
Procurement often overlooked area of opportunity - can represent 2/3rds of total cost
THe past
Prior approach & challenges:
Lack of data and visibility on how much was being spent
Siloed departments that didn't coordinate
Limited supplier compliance and tracking
Lack of data and visibility on how much was being spent
Siloed departments that didn't coordinate
Limited supplier compliance and tracking
solutions
Coppertree Partners approach:
TACTICAL CASH FLOW ASSISTANCE
Worked with management to quickly roll out policy changes to travel, telecom, meeting expenses
DEVELOPED TRUE BASELINE AND VISUALIZATION OF COSTS
Pooled data sitting in disparate systems, cleaned up the classification of data (i.e. items may be the same but with different name variations across the company), and provided cost visualization with helpful breakouts such as regional views
CHALLENGED DEMAND
Worked closely with executives on source of demand and challenging for greater standardization, substitutes and even elimination where value couldn’t be justified
PREPPED FOR SUPPLIER NEGOTIATIONS
Calculated the true costs from a supplier perspective and their likely margin added to help with negotiation process
PUSHED FOR TOTAL COST OF OWNERSHIP
Proposed company to use eSourcing tools for getting broader vendor reach and evaluating RFPs with a total cost of ownership perspective – didn’t want to go with a lower cost vendor who would actually cost more when other elements were factored in such as training
STRENGTHENED COMPLIANCE
Once vendors were in place, developed performance scorecards to monitor contract adherence
Impact:
- Increased EBITDA by 15%
- Strengthened end-to-end procurement process including greater transparency of costs, internal discipline in sourcing suppliers, and use of technology
- Mitigated risk of cost over-runs and contract violations
Additional insights and takeaways
The most critical part of this process was upfront in knowing what was being spent and how much the true costs were to suppliers. This was difficult but incredibly powerful to have, not only to put pressure on demand internally but also for negotiations. Technology has played an important role here with analytics models that predict movement of prices to improve bid accuracy and propose changes to your product design that optimizes features and lowers cost while speeding up the overall process. Would expect AI to be a game changer here in monitoring pricing changes, suggesting vendors, making automated purchases and in ensuring that the flow of funds adhere to contract stipulations.
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