Supply Chain Opperational Excellence
North American Energy Company
What was the problem?
This large energy company was seeking to implement a major supplier rationalisation and inventory reduction programme. A number of consulting firms had been used to define “best practices” for supplier management and the organisation had many ideas about what they wanted to do but no clear direction or experience on how to actually get it done. Resistance and avoidant behaviour by the organisation had made previous attempts at implementation unsuccessful.
What did you do?
We established a clear set of objectives before starting the project to help focus activity. These covered key points such as implementing purchasing agreements with preferred vendors to reduce costs by 25%, designing and implementing a measurement process to capture the financial results of the new contracts, eliminating non-value added steps in the vendor-customer process and initiating the process of outsourcing certain areas of inventory management.
What happened?
An extensive design phase that included “best practices” investigations and conclusions was already completed so implementation was the critical factor. A mobilisation and education process was developed for the majority of the materials related workforce. During facilitated workshops and training sessions the process was explained, potential barriers to implementation were identified and roles and responsibilities were defined. Team members were assigned to major commodity and service areas to communicate the goals, objectives and the new way of operation to vendors.
What was the outcome?
The results were fast, impressive and delivered long-term improvement capability. The total cost of each commodity/service was reduced by at least 30%, while inventory reductions of 70-90% were achieved for each contract. The quantity of contracts was significantly reduced (from 12 to 1 in one commodity group). Over $1.5 million was saved in the telecommunications area alone and the contracting process was improved with six major commodity/service groups.