Driving Strategic Impact: A Curzon Consulting Guide to Procurement Excellence
As management consultants, we help clients achieve substantial cost savings and efficiencies through procurement transformations. But truly effective transformations require surmounting common challenges like limited spend visibility and stakeholder alignment.
Based on a recent engagement delivering over £5M in savings, here are our proven tips for procurement transformation success:
Optimise spend visibility
Robust spend analysis is crucial. Categorise expenditures and pinpoint top suppliers and contracts per category. Without clean baseline data, it’s impossible to identify savings levers. Advanced analytics and mining uncover hidden insights, while stakeholder interviews provide a qualitative context.
Benchmark and identify gaps
Benchmark pricing and performance versus industry best practices to reveal overpayment. Consolidate volumes for improved leverage. Deep supply market analysis uncovers alternative vendors and guides negotiations.
Strategise and priortise
Conduct opportunity assessments to inform transformation planning. Develop tailored category-specific sourcing strategies. Model potential savings scenarios and sequence initiatives based on impact, effort, and stakeholder readiness.
Secure stakeholder alignment
Amidst change, align stakeholders through clear communication and early buy-in. Identify key decision-makers and influencers. Educate on best practices and projected bottom-line impact. Procurement must shed its tactical image and be seen as a strategic function driving millions in bottom-line impact.
Relentlessly implement
With the strategy set, focus intensely on implementation. Maintain discipline in negotiations while preserving supplier relationships. Enforce contract compliance and tail spend management.
Continuously improve
Sustaining change requires continuous improvement. Redesign operating models, policies, KPIs, training, and integrate new tech and ways of working. Build analytics to monitor savings and flag waste recurrence. Institutionalising change is the hallmark of procurement leaders.
After meeting our cost-savings goals, we leveraged our award-winning assessment framework to ensure the procurement organisation’s long-term success. Our framework evaluates Procurement across five dimensions: People, Strategy, Systems, Governance, and Management. This data-driven approach identified gaps and enabled us to strategise implementing best practices. Ultimately, these steps addressed challenges, so the procurement organisation can expand its influence and be viewed as a strategic partner across all business units.
In conclusion
As trusted consultants, we overcome inertia and silos to deliver rapid yet lasting transformation. With deep expertise and cross-industry perspective, we objectively assess opportunities, align stakeholders, and implement best practices. The result is simplified sourcing, lower costs, reduced risks, increased efficiency, and strategic impact.
Let us conduct an initial diagnostic for your procurement organisation. We will benchmark performance, identify savings levers, and provide a roadmap to deliver value.
CONTACT US TO FIND OUT HOW WE CAN HELP
Delivering greater procurement efficiencies for a construction company
The issue
- £1billion division split into 6 semi-autonomous business units, spending £450m per annum on materials and sub-contracted services
- Each business unit under revenue and margin pressure especially those dependant on public sector work
- By re-establishing good procurement practices a modest 3% savings target was agreed upon, the stretch being that the full cash saving had to be delivered in-year
- No single picture of procurement spend or performance compared to the external market
- Procurement & supply chain savings were already baked into business unit budgets and there was pressure from plc to deliver over and above this
Solution
- Created a definitive ‘spend cube’ and with it a single set of numbers
- Completed a top-down and bottom-up analysis of spend at the detailed category/supplier level and agreed impactable spend
- Created and executed a prioritised implementation plan closely monitoring and recording the benefits as they are realised
- Redesigned the P&SC organisation bringing in the necessary skills and expertise as required
The results
- In-year cash savings of £8million with an exit run rate of £10million per annum
- New operating model fully installed and driving benefits (sustainability)
- Benefits fully traceable within business unit P&L
An award-winning team
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Delivering business turnaround
The issue
- The UK business of a global construction materials manufacturer had been losing money for several years due to inefficient operations and declining sales in an industry sector experiencing extremely challenging times.
- A full business review and improvement plan were required to stabilise the business and address the financial performance.
- Significant cost reduction efforts had already been made to offset the declining sales and lower margins, but the business was continuing to lose money.
- Sales lacked the basic tools and capabilities to compete effectively and operations were poorly managed resulting in over-production, an inefficient organisation and poor working practices.
- The leadership team was highly dysfunctional and lacked the capability to define and execute a plan to address the situation.
Solution
- Undertook a full situational analysis of the business operations and identified changes required to reverse the performance trend
- A comprehensive change programme was designed and implemented with the full involvement of the business management team
- Recognising that the current actions were primarily to address the initial objective of eliminating the business losses, a parallel stream of work focused on the market and development of the future strategy for the business
- This dovetailed with the reorganisation of the commercial functions and outlined the business’s future journey to go beyond a break-even situation and achieve acceptable returns
The results
- The programme had a significant impact on the business across all areas of the value chain and delivered a sustainable bottom-line improvement of over £5m p.a in 12 months.
- In addition to the delivered cost optimisation actions the re-focusing and capability development work with the sales team secured a contract renewal with three principal customers and the acquisition of a new major account and stemmed the loss of any further business.
- The new ways of working that focus on using sound management information to run the business and to action issues have taken root across the organisation. Decision making improved and continuous improvement is becoming established.
- The Group Executive sees the step change in performance that was achieved in the timeframe as the most successful intervention of its kind across the portfolio in recent years.
An award-winning team
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Procurement Organisation Value / Maturity Assessment
Challenge
After a challenging year during which financials have been impacted by the Covid-19 pandemic, our client launched an ambitious strategic initiative aiming at becoming more efficient, going back to growth and delivering sustainable value to Consumers and Doctors.
Curzon Consulting was instructed to conduct a full Procurement Organisation Review & Spend Opportunity Assessment
Curzon's approach
Curzon conducted a complete review of the procurement function. It included a quantitative part aiming at identifying cost savings opportunities and a qualitative part aiming at assessing the maturity of the organisation and value delivered to the business.
Quantitative Assessment
- Cleaned and categorised spend data
- Provided full spend transparency, baselined spend, volume and unit cost by category, supplier and hospital
- Conducted Category deep dive for each key category, identifying opportunities and sourcing levers
- Identified and quantified savings potential via internal and external benchmarking
- Prioritised source plan with savings targets by spend category
- High level 3-Year business plan
Value/Maturity Assessment
- Assessed procurement organisation against best practices in 8 dimensions.
- Quantitatively and qualitatively assessed the procurement team, conducted time analysis, salary benchmark & reviewed performance
- Business Partnering and perceived value : Interviewed key business stakeholders across all divisions, engaged with all Board Members to collect feedback and clarify expectations
- Assessed procurement influence across all spend areas,
- Defined and costed new (to-be) procurement organisation
Impact
- Identified broken links between Procurement and the Business : Procurement was perceived as a tactical team, good for tactical negotiations, but rarely involved in any strategic discussions.
- As a consequence, procurement was able to influence only a small part of non-strategic spend
- Curzon worked with the Senior Management Team and Key Stakeholder to define Business expectations and open the door to Strategic Procurement.
- Assessed existing Team, identified Gaps and suggested adequate procurement profiles
- Designed new procurement organisation, including sizing and targeted organisation costs
- Review external spend across 20+ categories
- Assessed procurement effort to category management, applied benchmarks and identified opportunities
- Identified substantial cost savings opportunities, leading to multi- £m cost savings
- Defined 3 years implementation plan, leading to more than 80% of the external being addressed.
- Curzon was engaged for the implementation phase of Procurement Transformation
Contact our Procurement service line lead,Stephane Boroncelli, to find out more
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TCO Analysis
Challenge
A sourcing initiative was conducted by the procurement team, leading to the selection of preferred suppliers and the phasing out a major incumbent supplier
Pricing agreement was based on lenses, which represent part of the total ophthalmic spend
Decision was made with no consultation of clinical key stakeholders, leading to low compliance to sourcing decision
In the meantime, as a retaliation, the incumbent supplier substantially increased pricing
Curzon's approach
- Created full spend transparency on Ophthalmic Spends
- Sourcing decision was based on 30% of the total spend only
- Applied TCO analysis
- Identified risks as un-addressed part of the spend led to major price increase, wiping out all benefits of the sourcing initiative
- Defined requirements and specifications on 100% spend
- Conducted additional negotiations with selected suppliers
- Identified and implemented further savings opportunities through pack harmonisation
Impact
- Sped-up implementation and increased Clinical compliance
- Eliminated negative commercial impact and achieved multi £m additional savings
- Achieved operational efficiencies through pack standardisation
Contact our Procurement service line lead,Stephane Boroncelli, to find out more
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Value based Procurement
Challenge
Our client, the largest European manufacturer, was trying to rationalise its product materials contractors. With several billion pounds worth of expenditure and over 300 contractors to manage, the state of the relationship was very tactical between procurement And the supply base. As most of the products were unique, prices were negotiated periodically with little understanding of cost drivers and value for money. At the same time, perceived value of the contractors was based on Business Stakeholders emotional preferences.
Curzon's approach
We launched a major review program aiming at maximising the value received from contractors while optimising prices and achieving cost savings.
We engaged, early on, with all of our client’s Business Units and onboarded them through the transformation journey., We ensured Business Stakeholders were not just kept informed but part of the solution.
Value
- Reviewed and implemented improved SLA’s
- Developed Unique contractor value assessment technique where Quality, level of services, innovation, sustainability where all factored-in a comparative way
- Incentivised and rewarded suppliers bringing innovation and helping with sustainability strategy
Price-wise
- Brought cost transparency through costing formulas
- Implemented advanced negotiation techniques to optimise pricing
- Conducted global contractor market review for all types of materials
- Created competitions in the monopolistic areas
- Went to market in areas dominated by powerful historic contractors
- Proactively collaborated with key suppliers to implement efficiencies & improvements
Impact
As we stayed well beyond the sourcing process we ensured the following benefits materialised.:
- Stakeholders collaboration and procurement seen as key partner to the business
- Multi-million £ Cost savings achieved over 3 years in a row
- Increased of level of services, delivery performance and products quality
- Full support to client’s sustainability objective
Contact our Procurement service line lead,Stephane Boroncelli, to find out more
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Lean value chain analysis and design for global precision engineering products leader in aerospace industry
The issue
- A complex multi-stage casting, machining and coating operation manufacturing precision components for the aerospace industry
- Underperforming organisation and low levels of ownership for improvement
- Extremely low velocity through the process, with poor yields and excessive scrap
- High inventories of work in progress and finished goods
- Production measures encouraging over-production
- Silo mentality in operations exacerbating the WIP situation
- Disaffected workforce with little interest in driving continuous improvement and no effective performance management in place
Solution
- Analyse the current situation to articulate the operational improvement potential (yield uplift and inventory reduction)
- Create the business case for change (P&L and cash impact)
- Design a pilot to create an integrated supply chain for the largest volume product including suppliers and JV partners
- Detail design of a pull model and elimination of WIP stages along the entire supply chain
- Re-design of the layout and organisation to separate ‘dirty’ and ‘clean’ operations to reduce rework
- Launch of a continuous improvement approach within the shop floor to tackle scrap, rework and productivity issues
- Design and introduction of a cascaded performance management framework
The results
- 40% reduction in inventory identified through WIP elimination
- The feasibility of a 50% reduction in production lead time confirmed
- 10 percentage-point improvement in yield performance from closer process control
- Plan to deliver £5m savings in-year agreed
- Changes to ways of working implemented in pilot cells with Lean work-flow approach trialled
- Programme of Lean training and continuous improvement projects implemented
- New KPIs are being used to drive the performance of the value chain in place of traditional cost absorption metrics
An award-winning team
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Operating model refinement and commercial focus to deliver a step change in business performance
The issue
- A subsidiary of a global defence company, providing technology-based R&D solutions and advisory services to government and defence organisations and private sector companies at the cutting edge of secure communications and cyber warfare
- Despite repeated calls by Group to improve, the business continuously failed to meet performance expectations on revenue growth, profit margin and free cash flow
- The business was suffering from an overly-layered and siloed organisation structure, with burdensome management processes and lacking commercial focus
- The underlying issues were structural and an absence of effective performance management, wrongly being justified because business discipline would stifle creativity and innovation
Solution
- Undertook a business-wide design and business case development stage to anchor the current performance failings and the required changes
- Implemented over a 12-month period working alongside the business unit leadership with a structured plan;
- A new leadership team established, with stronger governance processes, metrics, and proactive staff engagement
- Simplified the operating model and aligned capabilities to market needs
- Re-framed value propositions and initiated the move into critical national infrastructure
- Implemented resource management to drive productivity uplift
- Implemented new mentoring and HR processes to underpin talent management
- Supported post-implementation by refreshing the plan
The results
- 29% revenue uplift (versus budget target)
- 18% Return on Sales achieved versus a 15% target for the financial year
- 90% improvement in business cash flow
- 10% points increase in Engineer productivity, with a continued increase to 74% utilisation in year 2, and climbing
- Transformed the operating model and business culture to be customer and commercially focused
- Established performance management at the business and individual level
- Underpinned changes with disciplines, governance, reward structures and visibility
- The Project won the Management Consultancy Association’s award for “Performance Improvement in the Private Sector” with full sponsorship of the client
An award-winning team