Strategic Procurement Consultants

Executive Interims - Supply Chain Practice is a specialist provider of former Big Four strategic procurement consultants.

A strategic approach to procurement typically delivers savings of between 15-35%, depending upon the category, whereas comparable tactical sourcing approaches will typically deliver in the order of 5-10% per annum.

So what do we mean: "Strategic Procurement "?

Some people think it's simply about supplier rationalisation and consolidating expenditure, but strategic procurement consultants understand that economies of scale (which is what people are trying to achieve by consolidating volume) aren't always the most important cost drivers to go after. Certainly a "one-size-fits-all purchasing strategy" is an oxymoron.

Total Cost of Ownership / Acquisition

Before anything, it's vital to build a total cost of ownership model, which should include inventory carrying costs and the labour costs of acquiring the purchase/s, or if you're talking about a piece of capital equipment, it should include the cost of maintaining and repairing the equipment throughout it's life-time.

Cost Driver Analysis

With a detailed cost breakdown of this nature, strategic procurement consultants can identify the most important cost drivers, and by extension will be able to derive the characteristics that cost-advantaged suppliers are likely to have.

If for example, a high proportion of purchased costs are due to raw materials, then selecting suppliers who have a demonstrable track record of value engineering the product to minimise raw materials could yield the most benefits. Alternatively, purchasing from a non-domestic source where geographic price advantages for the material exist, may be a more favourable strategy.

Where labour costs are of significance, then low-factor cost countries like India and PR China may offer suitable cost advantages, but these benefits need to be modelled against the cost of holding additional inventory, the risks of having quality problems whilst the product is "on the water" and the additional logistics costs. Suppliers with high levels of automation, may of course also be of interest, or more laterally suppliers highly innovative design capabilities who are expert in design for manufacture.

Supply Industry Research

An acid test for strategic procurement consultants is how quickly they can develop an in depth understanding of a supply industry that they're unfamiliar with. The internet is the easiest place to start, but actually the information that can be gleaned from the world-wide-web can be of questionable quality and certainly shouldn't be the only source.

Large business libraries can be particularly useful and information brokers are often helpful. Subscription or pay-as-you-go on-line research portals can also provide a wealth of supply industry background that is extraordinarily beneficial in a matter of hours. Using the right tools costs a little extra, but the net result is often that a strategic purchasing consultant can learn in a few weeks more about an industry than someone who's specialised in it for decades.

Supplier Relationship Models - "Horses for Courses"

Strategic purchasing consultants can advise on a range of relationship models exist along a continuum from: "buy the supplier" (vertically integrate) at one extreme to "commodity trading" at the other and the various shades of grey (including Joint Ventures and Preferred Suppliers) in between.

With an understanding of what the key cost drivers are, a detailed understanding of the market, and where the "power" lies, the most appropriate relationship model can be selected. For example, if a supplier has cost (or value) advantaged product or service technology, then it could be appropriate to establish a technology licensing agreement with them. On the other hand if there's very little to differentiate suppliers in a particular supply market and quality and delivery standards are known to be acceptable and the market isn't highly consolidated, then depending upon the costs of switching, more of a "commodity trading" price orientated / no loyalty focus may be appropriate.

Need Strategic Procurement Consultants?

If you'd like to know more about how former Big Four strategic procurement consultants can bring your organisation value, don't hesitate to get in touch. Alternatively if you'd like to know more about interim purchasing managers, we can help there too.