Acquiring third party services

Significant cost savings delivered in the acquisition of third party services

The Client

A World leading pooling solutions company specialising in the provision of reusable pallets, crates and containers and associated logistics services. In 2016 the client secured revenues of $5.5bn.

Historically, procurement had provided a governance role to support the senior corporate stakeholders who had assumed the lead role and responsibility for going to the respective supply markets and sourcing the required services, including leading the sourcing process and the selection of suppliers.

This led to an inconsistent approach to sourcing which did not fully leverage the commercial value of the spend by, for example, consolidating spend into fewer, preferred suppliers.

The Objective

To deliver significant cost savings in the acquisition of third party services across I.T and Telecoms, Professional Services, Marketing, HR and various other categories in short timescales to meet a group cost reduction programme objective. Whilst also ensuring procurement and supply chain, skills transfer, training and development to the existing global team.

Odesma Impact

It was important for procurement to engage with the professional services business sponsors from Group Finance & Strategy and ‘win’ their support to develop and implement a future approach to managing Professional Services

This was achieved by establishing a Bi-monthly Steering Group with the business sponsors (Group Financial Controller and VP Business Strategy), with procurement seeking to understand the support that the individual stakeholders were looking for procurement to provide.

It was quickly established that the business sponsors wanted procurement to validate and provide credible and accurate spend data that demonstrated procurements in-depth understanding of the individual spend categories prior to engaging with the applicable business owners.

Working closely with the spend analytics team, procurement reviewed and re-classified the spend data to ensure the required credibility and accuracy was achieved as required by the business sponsors. In addition, procurement worked with Group Finance to create a new Professional Services Taxonomy structure that is now completely aligned with the new Global Chart Of Accounts which will provide a consistency of spend reporting in the future.

In addition to the agreed approach on spend analytics, it was agreed with the business sponsors that the following four key pillars would be core components of managing professional services in the future.

1. Deep supply market knowledge.
2. Business owners nominated for each sub-category
3. Established governance & PSL framework
4. Development of sub-category sourcing strategies

Procurement and the business sponsors obtained the approval of the client’s CFO to implement the agreed category framework approach.

The Results

Procurement successfully transformed its role from one of limited influence to being a trusted partner by demonstrating the value it can bring in developing the future strategic approach to managing professional services and playing a leading role in managing specific sourcing projects.

Procurement’s review of all Professional Services spend data, identified and reclassified applicable spend discrepancies, resulting in a 70% improvement in spend accuracy and transparency of addressable/non-addressable spend.

Significant cost reductions were delivered across a number of sourcing projects.
• Greater than $1m – consulting services – transformation
• Greater than $0.5m – consulting services – transformation
• Greater than $0.5m – tax consulting and compliance services
• £0.1m – £0.2m – Legal services

The Professional Services procurement category is moving to a ‘demand management’ model centrally managed by a Steering Group consisting of Finance, Procurement & Strategy and sponsored by the client’s CFO.