Sometimes it pays to stop and go right back to start of the process…
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.
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.
Odesma were given sight of a deal that was already on the table for the purchase of 34 new trailers in the UK.
Initial discussions indicated that the deal was already complete and that Odesma could provide support through to completion. The specification was in place, three prices had been received from the market using existing relationships and there was a cost of c£800k on the table.
To provide support and knowledge for the completion of a large trailer purchase.
Having investigated the business case, the market conditions and the non-standard specification of the trailers, Odesma questioned whether the business case stood up to scrutiny. It didn’t. As a result, they pushed the deal that was on the table to one side and started the process again.
Firstly, a cross functional workshop was organised to understand the operational, engineering and health and safety needs and concerns. This base information provided Odesma with the correct knowledge to contact six potential providers. After initial investigation this was whittled down to two. A further workshop and face to face meetings were organised with key stakeholders to decide on a preferred supplier. During this process, the pricing model was de-constructed and as a result, the specification was standardised. This would not only have a positive effect on the price of the trailer upfront, but would also help drive improvements in the loading time operationally.
Odesma created three main levers for efficiency and cost reduction with the preferred supplier and negotiated hard on every level to deliver the maximum benefit to the business:
- Operational efficiencies
- Engineering time
Five months after being told that there was already a deal on the table, Odesma delivered 40 new trailers as opposed to the original 34 quoted (six free/nominal cost) with a significantly higher specification mix at £130k less than the originally quoted price.
In addition, it is estimated that through the standardisation, which helped to reduce the capital cost, the resultant specification has improved loading times which has resulted in over £200k of operational efficiencies.
The engineering costs to change the mix of trailer designs and to build in the standardised elements, such as fixing points, walkways and removal of head boards was negotiated completely out of the contract.
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