A dedicated interim procurement support helped successfully handle the combined challenge of higher level attrition and internal strategic changes.
Strategic Sourcing in Travel Management
A leading US based software product company significantly reduced its outsourced development cost using strategic sourcing process.
Overview
The company was looking to optimize its outsourcing cost of building connectors used for its major product portfolio. The incumbent pricing appeared to be higher compared to the market and applying strategic sourcing process would likely uncover various opportunities.
Challenges
- Apparent high cost of incumbent supplier including limited visibility into the price breakdown by service complexity.
- Services were designed on single turnkey pricing or retainer model, thereby little visibility into resources deployment.
- Single sourced incumbent service provider leading to stickiness, potential switching challenges and associated longer term risks.
Solutions
We ran a detailed strategic sourcing process over 8 months period that not only reduced the cost, and program risks significantly but also uncovered many inefficiencies.
Various work streams included –
- Vendor Review & Negotiation: Conducted a detailed spend analysis of the previous 3 years of the program SOWs and uncovered several inefficiencies in the cost and resources allocation.
- RFP for Market Alternatives: Conducted a robust RFP process using seven qualified suppliers that resulted in market corrected prices and multiple service options.
- Pilot / POC: Pilot development cycle was run with two of the shortlisted suppliers for over 2 months to make sure of their service capability using offshore (India) development centre.
- Final Supplier Selection: Post the pilot, the selected supplier’s rates and services were further negotiated and optimized, ensuring optimal long-term cost savings and the overall project success.
Results
The project delivered near 33% reduction in unit pricing alongside reduced supply risk, as well as helped reduce the demand on post development support significantly.
Key outcome of this exercise included –
- Potential savings of near $1 million on annualized basis.
- Improved project management practices and reduced inefficiencies.
- Better visibility into resource allocation and overall project status.
Strategic Sourcing consistently provides improved results by helping uncover inefficiencies in the buying process.
Other Case Studies
Supplier Performance Management (SPM)
A robust Supplier Performance Management (SPM) program helped identify key long-term supplier partners and improved overall supply chain performance.
Sales & Operations Planning (S&OP)
Building a Sales & Operations Planning (S&OP) program grounds-up helped improve visibility into end-to-end process – from customer forecast to...
Content Design & Development
An end-to-end solution on training content design & development increased the effectiveness of L&D program and resulted in higher Return...