Concluding negotiations on a new generation gas engine

The Client

A UK FTSE 250 world leading provider of mobile power solutions with a staff of 6000 who deliver solutions to clients in over 100 countries.

Odesma was engaged to provide expert support and deliver savings, enhance skills and deploy technologies that would accelerate the organisation’s procurement excellence programme, a key component of a company-wide global transformation programme.

Within weeks of being appointed, Odesma had undertaken significant analysis of the procurement operation and third party spend data. This identified a number of areas where significant savings could be made.

A core component in our client’s product offering is the engine unit. They provide a range of diesel and gas powered options in their product portfolio. This is a high cost component and is a significant element in the operation of their global fleet.

A new generation gas engine had been developed. Tests had been successfully carried out. Negotiations had been completed and orders were being placed…despite the contract not being finalised and in place.

The demand for these gas engines was high and our client was more concerned with the capacity of the supplier and delivery time than they were necessarily on the price.

The factory that manufactures these engines is located in Europe, with our client paying in US$ – which meant that they were, and would be exposed to currency fluctuations.

The Objective

To provide the commercial expertise needed to put in a place a robust long-term agreement to cover the provision of these engines to be used in the manufacture of its power generation units.

Odesma Impact

Our category lead worked closely with our client’s Senior Engineering Team to ensure that all commercial elements were aligned with the technical specifications.

There were a number of specification options on the engine that they were paying for that weren’t actually needed, so there was a straight forward price negotiation with the Original Equipment Manufacturer (OEM) to ensure that our client’s commercial position was optimised. This included warranty terms, payment terms and currency fluctuation risk.

The Results

  • A long term currency hedge was put in place, with the supplier taking the risk from currency fluctuations.
  • Improved payment terms were negotiated with the supplier.