Global Procurement

Issue

As part of a comprehensive transformation program to improve global profitability, a manufacturer of audio cds, cd-rom, and pre-recorded audio and video cassette tapes set its sights on achieving significant economies of scale by implementing a global strategic program to realign a fragmented tactical Purchasing organization. The company faced a very challenging market with declining sales and margins, which required management to reduce costs without impairing operations. The company also had an extremely decentralized approach to procurement that was not organized strategically.

Highland Approach

A detailed analysis concluded that immediate changes were needed in business practices and operating procedures. Accordingly, the team implemented and executed on a Strategic Sourcing Program, which included a thorough review of all goods and services purchased by category and corresponding supplier. The process involved setting up a cost savings program management process, prioritizing and managing strategic sourcing programs within each major category, creating value for the organization by leveraging the spend, improving discounts and negotiating more favorable payment terms while improving service levels and lowering total cost of ownership.

The second major component of this strategy focused on organization realignment and rebuilding of the Procurement function around a Strategic Category Management focus with tightly integrated controls for managing the Site Purchasing organization.

Actions Taken

The Highland Group partnered with client teams to implement a Strategic Sourcing methodology focused around commodity management. Reaching the goals required a redefinition of skills and a new organization to manage the ongoing implementation, cultural change, and improved processes between and within the business unit, corporate support organizations and suppliers. The new processes improved communications and collaboration to achieve the following:

• Improved spend management and metrics through the implementation of the Ariba Spend Visibility technology.
• Established Category Management processes in conjunction with key performance indicators at the Category Management and Site Purchasing functions.
• Established policies, procedures and metrics to manage Procurement and supplier scorecards and formal quarterly reviews for managing strategic suppliers.