On October 19th, the Future of Sourcing Awards will celebrate organizations and individuals that have shown innovation, leadership and transformation in categories that are critical to the sourcing industry. Interviews with the finalists provide helpful insight about their projects, the problem they sought to solve and the impact to their organizations.
Can you outline why your team embarked on this project and the problem that needed to be solved?
The client is a Fortune 500 retail company that was facing immense challenges overcoming the severe impact of the pandemic on its brick-and-mortar sales. It needed to urgently revamp and transform its procurement organization so that it could help the business recover and grow. The procurement function needed to evolve, redefine its priorities and play a strategic role within the company to respond to the evolving business environment and consumer habits because of the pandemic.
- Improved business relationship to drive savings in a challenging business environment
- Close supplier partnerships, brokered by procurement, to enhance supplier-driven innovation and minimize business disruption
- Increased cost management as the client focused on improving sales and margins
- Improved working capital and liquidity
- Assistance with capital expenditure projects as the business started to make investments to recover and expand
- Sustainability through renewable energy project
The company recognized that to get to the next level, it needed external help and decided to partner with GEP both to find solutions for its immediate concerns as well as help in its longer procurement transformation journey. It selected GEP for its expertise in procurement and supply chain solutions, its capabilities in retail, and its experience in helping other global companies overcome challenges and grow.
GEP strives to help enterprises rapidly build the infrastructure and capabilities required to power high-performance procurement organizations. Through this project, which required unified approach encompassing strategy, software and managed services, GEP was able to showcase how a high-performing procurement function can play a crucial role in helping the organization overcome series of external challenges and help it in a transformation journey.
How were things done originally and what was the inspiration to innovate the process?
The company had a capable procurement organization in place prior to the pandemic, but the team was set in its ways and was unable to leverage its existing capabilities to drive improved outcomes. Procurement needed more support to respond to the fast-changing market landscape and external challenges brought on by the lockdowns, transportation restrictions, social distancing, the shift to online buying and new consumer shopping patterns.
The company had furloughed a high percentage of their staff, leaving a bare-bones operations team at the management level to run the business during the lockdown and its stock prices were falling. We realized we could help the client:
- Drive the sustainability and ESG agenda by utilizing more renewable energy.
- Improve gross margins through competitive tension and improve the sourcing execution speed with the use of auctions.
- Gain greater control over spend, drive greater compliance and save costs by shortening its long tail and consolidating suppliers.
What KPIs did you use to measure success for this project? (For example: performance, customer satisfaction, revenue, sales or relevant financial gains?)
Overall, savings/benefits was the key metric used to measure outcomes and success. For every project, savings were approved by client’s finance team.
For specific initiatives, metrics to measure outcomes differed for individual projects:
Overall, savings/benefits was the key metric used to measure outcomes and success. For every project, savings were approved by client’s finance team.
For specific initiatives, metrics to measure outcomes differed for individual projects:
- Auctions: Outcome was measured based on reduction in unit price compared to historical cost
- Tail spend management: Outcome was measured based on reduction in tail spend and reduction in number of tail-spend suppliers
- Renewable energy: Outcome was measured by calculating the increase in the proportion of electricity from renewable sources post implementation.
How do you plan to ensure that the new model remains relevant and adapts to the future needs of the market?
Many changes were in the form of improving processes and optimizing approach. These changes have been integrated into the client procurement team’s way of working. For e.g., the quarterly leadership governance framework has been implemented to ensure periodic top alignment between business teams and procurement.
Playbooks have been created wherever possible. For e.g., a renewable energy playbook has been developed so that the strategy can be extended to more locations in the future.
Procurement is now collaborating with the leadership on key business initiatives such as sustainability and inflation mitigation. As procurement is close to the supply market and has access to contract and spend data, it is well placed to advice on managing inflationary pressures and future needs.
What advice do you have for those who may want to implement this innovative approach in their own organizations?
It is important to align procurement’s goals with the goals of respective business units as well as the organization.
In an increasingly unpredictable world, understanding the priorities of business as well as monitoring external developments helps anticipate challenges and deal with them proactively.
Operating with a 'flat' organization hierarchy that allows for rapid decision-making is important in times of crisis. Digitalization helps in unlocking huge opportunities and enables the procurement organization to reduce its effort on tactical activities, helping it focus on strategic priorities. Digitalization also empowers procurement because it increases ease of access to key information, which in turn enables rapid and accurate decision-making.
I'm sure your company has many different processes and projects they are outsourcing. Why did you choose to submit this specific project?
While all projects require addressing different challenges, this project was unique due to the number and scale of challenges faced by the client.
The Covid-19 crisis had a seismic impact on the retail industry, with stores forced to shutter and an escalating shift to e-commerce. The resulting furloughs and falling stock prices added to the sense of panic. External factors such as supply chain disruptions and trade tensions between US and China further exacerbated the challenges.
Big businesses had to react with speed to this onslaught of external shocks as those who waited too long to adapt risked never being able to catch up. The client’s procurement team partnered with GEP to steer the client through these challenges, which helped it emerge stronger through the pandemic. To achieve these results, GEP worked with the client on multiple goals like developing close supplier partnerships, managing costs, improving working capital, driving sustainability and optimizing the approach to capital expenditure.
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