A dedicated interim procurement support helped successfully handle the combined challenge of higher level attrition and internal strategic changes.
Strategic Sourcing in Travel Management
Deep spend analytics helped a global HVAC manufacturing & services company uncover key cost savings opportunities on its direct spend.
Overview
The company was facing challenges to meet its cost savings target and was looking to conduct a detailed spend analysis & opportunity assessment on its direct spend, that included both the raw materials such as copper, steel, aluminium etc. and bought out items such as transformers, heaters, sensors, chargers etc.
Challenges
- Lack of visibility towards meeting procurement and supply chain cost reduction targets.
- Challenges in data availability due to multiple ERP systems across business units.
- Significant gaps in current spend analytics process, the output of which could not be relied upon.
- Needed faster and more informed decision making for the sourcing projects.
Solutions
Our approach included a robust data categorization process, an advanced spend analysis, market price benchmarking, and opportunity assessments.
Various work streams included –
- Data Categorization & Analytics: Developed a spend cube by organizing spend data on commodity, business units, suppliers, regional geographies, and manufacturing units etc., enabling a clear spend view.
- Opportunity Assessment: Analysed spend patterns at the product part level to uncover hidden opportunities. Close to 1000 parts were individually analysed to create savings opportunity bucket.
- Value Chain Price Benchmarking: In addition to standard analytics, conducted value chain price benchmarking on bought outs such as transformers etc. that helped uncover significant opportunities on pricing anomalies.
- Composite Price Comparison Analysis: Conducted composite price comparison analysis to uncover pricing trend anomalies specifically on the products that have multiple commodities (copper, steel etc.) in the value chain.
Results
The project delivered near 12% cost savings opportunities bucket on the large addressable spend. The project also uncovered several inefficiencies in the spend data quality, supplier contracting, price benchmarking etc.
Key outcome of this exercise included –
- Potential cost savings bucket of near $42 million was uncovered for further investigation and actions.
- Provided avenue to conduct value chain price benchmarking for bought outs.
Improved visibility into direct spend categories at the part level.
We are surrounded by data, but only deep analytics can provide meaningful insights for effective decision making.
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