Projects

Tenacity, a cool head and broad shoulders keep costs under control

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.

Our client won a major piece of work in Zimbabwe to deliver a large power project. This would require shipping large amounts of heavy power generation kit into an area of the world renowned for being difficult to create movements in and out of.

The Objective

Build a full logistics strategy to carry out the delivery of a large power project into Zimbabwe.

Odesma Impact

Odesma’s team believed that this required a full logistics strategy to be built. With the project team having never built a logistics strategy before, Odesma took the lead and got the strategy signed off, which included:

  • specification of what had to be delivered and when
  • delivery options available with pros and cons of each
  • risk assessment
  • what to do when things go wrong
  • market pricing

Having got the original pricing in via the organisation’s normal shipping brokers, Odesma’s team took the requirement directly to the shipping lines to get their direct rates and used these to help negotiate with the brokers against their original prices. Given the location of the shipment, it was important that the company minimised their risk, so appointed their nominated broker, who would take responsibility for the shipment door to door.

As this was happening and as a result of some lost time at the beginning of the process, it became apparent that the only way to get all the equipment in on time would be through air freight. Having negotiated down the shipping price, it looked like this would be entirely lost as the air carrier stipulated that they would need to use 2 x Antonov freight planes plus a 747. This was going to increase costs by over $2m.

Odesma, not believing that 2 Antonov’s should be required, requested the engineering drawings on the cargo hold and demonstrated that they could get all of the equipment from the two planes into one Antonov plus the 747.

At the last minute, changes to Zimbabwe’s import rules meant that a load critical to the project got stuck at the border, with the broker requiring a further $680k payment to get this into the country.

The Results

From an initial budget of $3.5m, initial negotiations with the preferred shipping line brought this down to $2.5m, a saving of $1m.

This $1m saving was then put at risk when the only possible route in became air freight adding $2m to the budget. Through re-engineering the loadings of the equipment, Odesma managed to bring this down to $1m and therefore still within the original budget.

However, the changes to the import rules at the last minute meant that the broker was looking for an additional $680k, this was negotiated by Odesma down to $300k…a further $380k saving.

So, overall, having negotiated nearly $2.5m in savings throughout the project, it came in some $300k over budget. But given the circumstances…a real result.