Projects

Local knowledge and commercial “know how” help drive a 23% cost reduction

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.

Building on the success in reducing fuel and lubricant costs in the UK and the USA, the Odesma team examined the opportunity for reducing the costs of Diesel Engine Oil (DEO) used by the organisation in Africa.

The client has facilities across 29 countries in Africa, supporting customers from a diverse range of industry sectors. Whilst fuels and lubricants were looked at as a global commodity and had a global category manager in place, Odesma quickly recognised the need to have regional supply structures in place and the need to engage at a local level.

Import tariffs made up a significant part of the overall DEO costs in African countries.

The Objective

To reduce the cost of fuel and lubricants in Africa

Odesma Impact

Africa is a complex and challenging place to do business, therefore our category specialist worked closely with the African Managing Director together with the newly appointed Procurement Manager for Africa, using their local knowledge of how to get things done whilst demonstrating a technical, trading and commercial expertise that they could benefit from.

The Odesma fuels and lubricants category specialist reviewed all of the existing consumption and spend data (for each country), conducted a review, in collaboration with the technical team and engine manufacturer, of the DEO blend specification – separating out the commodity core refined oil price and the additive price. In doing so, this enabled the organisation to use locally blended products and generate value from in-country warehousing.

Bringing any new supplier on board would be a challenge – internally and with the engine manufacturer, Odesma engaged the incumbent suppliers, outlining the process that would ensue and explain what Odesma were trying to achieve. This helped optimise the client’s negotiation position by creating tension between each of the vendors and leverage the existing relationships throughout the competitive tendering process

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

  • Creation of a shortened supply chain, making it more efficient and easier to manage.
  • Distribution cost reduction due to in country warehousing and blending of the DEO.
  • Reduced import tariffs.
  • Trading and commercial up-skilling of the Global Category Manager and the African Procurement Manager.