Projects

From Cost Centre to Profit Centre – Re-structuring UK Fuel Management Saves £1m

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 organisations 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.

The client’s UK operation has a large fleet of rental temporary power units in use across a wide range of sectors. They had 14 suppliers of fuel in the UK, structured loosely around three areas: North, Central and South and were spending £14M per year with them.
With work having already been carried out in this category, there was an internal belief that any saving above £500k would be impossible.

However, there were still questions marks against why some suppliers could be more competitive than others; why local suppliers had the edge over national suppliers in terms of delivery responsiveness; why the supplier map didn’t match up with the distribution, and why one supplier dominated supply despite issues with service levels.

The Objective

To identify key suppliers in the fuels and lube industry and negotiate base commodity costs, distribution costs and vendor margins to achieve a saving of over £500,000.

Odesma Impact

All 14 incumbent suppliers were engaged by the Odesma Team to share with them the new strategy, and to invite them to participate in a competitive tendering exercise together with a number of new suppliers.Odesma designed a detailed Request for Proposal around the three core elements of the contract:

Odesma designed a detailed Request for Proposal around the three core elements of the contract:Base commodity price of the fuel.

  • Base commodity price of the fuel.Vendor Margin.
  • Vendor Margin.Distribution Cost.
  • Distribution Cost.

…ensuring that quality, responsiveness and collaboration was at the heart of their response.

This was managed entirely using Odesma’s technology partner’s e-Sourcing tool, which provided openness, transparency and speed to the engagement of suppliers across the country.

 

The Results

  • Suppliers numbers optimised from 14 to 6.
  • Creation of a UK Fuel Desk, and implementation of e-Sourcing tools made the acquisition process more efficient for both the organisation and their suppliers.
  • Team members running the fuel desk became more actively involved in the process, becoming actively empowered to be able to tell their suppliers what they will be paying for fuel (commodity price) each week.
  • Fuel Management is now an additional “service” offered to their clients through the sales team and is now recognised as a profit centre by the CFO.
  • Engaged suppliers are now actively bringing new ideas and better ways of working to the client.