Procurement

Typical activities in the ‘Procurement’ arena that we support include:

• eProcurement systems selection
• eProcurement application design, configuration and build
• Purchase to Pay process re-engineering
• Electronic workflow implementation
• Invoice / Document Management systems deployment
• Systems such as Ariba, Proactis, Agresso Procurement, CODA Neon, iPOS, SAP SRM, Oracle Iproc, Radius
• Electronic marketplaces such as @UK, UKprocure and EGS/IDeA.

Typical activities in the ‘Strategic Sourcing’ arena that we have support include:

• Strategic procurement reviews;
• Implementing strategic sourcing and category management processes
• Developing new procurement organisation structures
• Spend analysis
• Re-definition / Consolidation of supplier catalogues
• Set up of strategic procurement function / centralisation of transactional processes
• Delilivery of significant financial benefits for our clients in addition to improvements in quality and service.

Case Study - Strategic Sourcing and Procurement Project

Procurement and cost reduction project - Contracted savings of 10% of expenditure achieved

Overview

SystemsAccountants were engaged to provide consultants by the Group Procurement function of a well know UK based organisation (with an annual spend of £50m) to review the strategic direction, operating model, core processes and use of technology within the department. The fundamental driver behind this was to create and deliver on an implementation plan to move the department towards full engagement with the entire business as a value adding service provider, whilst achieving enhanced cost reduction on behalf of the organisation.

The business landscape supported over 200 locations varying dramatically in size and also encompassed a number of ‘partner businesses’ and field operatives with no office base. Whilst the focus of the review was focussed on the larger business footprint there was an underpinning need to realise ‘benefits for all’.

The purchasing function, whilst adding significant value, had developed organically and did not have a formalised remit within the organisation. As such there was a lack of understanding of the value proposition of Procurement within the business which in turn was causing issues around leveraging supplier catalogues, benefiting from economies of scale, gathering accurate spend data, ensuring compliance and engagement with the business. Other challenges included fragmented spend, and a lack of structured data or systems.

The broad objectives of the assignment were as follows:

• Processes – Analysis of existing purchase to pay processes and establish potential best practice processes
• Operating Model – Review of job roles and structure based on current industry best practice
• Policy – Establish a formal purchasing policy for the organisation
• Accessibility – Examine how accessible procurement is to stakeholders in both actual and perceived terms
• Suppliers – Review of existing supplier categories and identification of saving opportunities
• Data – Spend analysis based on historical data and development of framework for accurate data analysis going forward
• Technology Usage – Systems analysis and review of move to eProcurement / electronic workflow

• This was to be conducted with full involvement from the business community outside of Procurement and Finance and presented with estimated return on investment.

The Assignment

SystemsAccountants provided a team of two consultants for concentrated periods of time from the beginning of 2007 until November 2008 to carry out a strategic review of purchasing expenditure on goods and services.

Phase one – high level review and scoping exercise (7 chargeable days over a 3 week period)

This scoping exercise encompassed interviews with key stakeholders (procurement, accounts payable, executive board, regional managers) and development of a high level spend analysis (based on a review of 12 months of AP data) to establish a top level understanding of Procurement within the organisation. This culminated in a presentation to the board outlining potential savings and establishing the scope, deliverables and approach for phase two. This work included:

• Review of existing data for accounts payable, to establish the main areas of expenditure and state of the supplier base.
• Development of a high level spend analysis.
• Development of an outline of savings potential based on existing data and opportunity savings matrix.
• Definition of scope and production of a plan for further phases for presentation/briefing at director/board level.
• Development of high level options for the organisation of purchasing.
• Development of project plans for a project based implementation.

Phase 2 - Pilot project and delivery

• The running of a pilot purchasing project involving areas of expenditure totalling £18m
• This involved working alongside staff to produce all appropriate documentation, the sourcing of supplier bases, the tendering of contracts, and the subsequent placing of business.
• Exercise produced contracted savings of £1.8m over the subsequent twelve months.
• Assistance with the recruitment of new posts including a head of procurement and five category managers.
• Further high level briefings and training sessions to introduce staff to the new purchasing regime.
• Based on a scope agreed with the board this phase covered a detailed review of the purchasing function, against best practice, to define a ‘to be’ landscape
• This encompassed P2P processes, organisation structure, systems needs and policy for a re-structured procurement function.
• This was further underpinned by a detailed document outlining savings opportunities and defining a clear route to realising them.
• Project delivered by working collaboratively with the Procurement Manager, Finance, IT and Board to develop a target operating model for Procurement that matched the business strategy, appetite for change and budgetary constraints.

Outputs Delivered:

Contracted savings of £1.8m (10% of the annual total spend from the areas of expenditure examined)

This comprised financial savings during the period of engagement released to the value of £0.5m

Projected further savings to the value of £1.3m.

Opportunity matrices

High level data analysis

Senior level briefings

Project plans

Savings analysis

Strategic options review

Client reference:

“Both consultants showed the highest level of professional expertise in all areas. They displayed a full range of technical skills and their in depth knowledge and experience was utilised to the full. What was particularly pleasing was the manner in which they quickly familiarised themselves with our methods of working, and integrated themselves into the staff hierarchy to work comfortably alongside new colleagues. They were able to quickly gain the confidence and trust of everyone with whom they had contact, and instruct and instill knowledge without taking away individual responsibility.

They kept the Project Manager fully briefed at all times and provided timely and full status reports when required. Changes to plan were seamlessly achieved and potential staff difficulties were considerately and smoothly dealt with.”

For urther information on how we can provide the resource to provide savings of up to 10% of your organization, please contact Allister Kitchen - Commercial Director at SystemsAccountants.