When is it the right approach and what benefits does this model bring?
Background
Our client was a fast moving, digital business with a real focus on the client-facing side of the organisation. Governance and process had taken a back seat in favour of speed of delivery. The IT and digital team knew they needed some help with their supplier engagement and management, however, they were’nt sure where to start as they had no in-house skills. Engaging a full time employee was not an option as:
- without the data, the ROI was not justifiable
- they weren’t sure exactly what was needed without a good understanding of their supplier portfolio
- it would take time to recruit that they didn’t have
Our approach
We suggested an initial spend and risk opportunity analysis which highlighted where the client needed to focus. This was a short, sharp piece of work with a known cost and a clear deliverable in the form of a recommendations report.
Unsurprisingly for a business so early in their Procurement journey, there were some obvious quick wins in terms of supplier consolidation, contract negotiation and spend control. It also confirmed their assumption that the workload did not justify an FTE – it was a perfect case for a managed service solution.
We agreed a fixed number of days per month to cover proactive work from us to:
- get control of the supply base
- instigate a process to manage the suppliers
- realise the cost benefits identified in the opportunity analysis
- start some proactive budget and forecast management
The client could access these days across the month as the workload required. There were no fixed days or hours, meetings and activity would be scheduled as necessary – and due to the flexible commercial model Aster operate, they only paid for a full day once the hours had been worked.
As the time was ring-fenced, the client could reprioritise the activities as needed to ensure the time was being used to deliver their changing priorities. Or the resource could be increased at short notice to meet increased demand, providing a fluid model that could flex around the client.
Deliverables
First up, we put in place a database to get a handle on all the existing suppliers (spend levels, renewal dates, key contract terms etc) to ensure we had the basic data in place to start from. Each supplier was allocated a business owner to ensure internal accountability and we worked with the legal and finance teams to join up procurement activity with the wider business processes to start getting some control in place.
It was important to get our arms around the current supplier base but to maintain that control, a new supplier engagement process was also key. We always start with the client in mind, and given the procurement maturity of the organisation, it was important to keep it simple to ensure the team was on board and it was a good fit with the way the business was used to working.
Alongside this, cost savings were a clear quick win. Terminating software that was no longer required, reducing licenses that were over-subscribed, negotiating better terms for the client and consolidating requirements to drive more value out of existing relationships were all opportunities we were able to deliver in the first year, driving savings of over 25%.
Having put the building blocks in place, we were able to support their budgeting process for the upcoming financial year with a more detailed understanding of ongoing spend as well as new investment required, giving clarity and surety that had been lacking previously.
As the benefits started to be realised (savings, cost management & reporting, renewals management, better contract terms with new suppliers to name a few), other areas of the business started to ask for support. Due to the flexible model in place, Aster were able to increase the days per month to support seamlessly and the client continued to get the service they had become used to. The increased scope and procurement maturity of the business meant the ROI on an FTE had shifted and Aster were able to transition the support into a permanent role which was a great result for the client.
Results
So what benefits did the managed service deliver for the client?
- A summary of their existing supplier portfolio with opportunities for value improvement and delivery via an initial Opportunity Analysis
- A consistent and guaranteed level of support available across the month that met their initial resource demands of less than one FTE
- Flexible resource to deliver the benefits identified, but with the scope to reprioritise activities and upscale as needed
- A justifiable ROI as the cost of the service was tailored to the clients spend portfolio
- Increased commercial awareness within the team and the introduction of basic procurement and supplier relationship management skills
Does this strike a chord with your business? To see if Aster can help, please get in touch #astercommercialservices
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