Cost Reduction: Transformational sourcing in the telecoms sector

Business Situation

What was the problem?

Solution Implemented

How did FP resolve it?

Benefits Delivered

What was delivered?
  • Supplier relationships transactionally focused with no improvement or collaboration.
  • No clear understanding of complete supply chain or market dynamics.
  • 18 months of competitive bidding activity with no contract award.
  • Incomplete information available for internal/external resource allocation.
  • Spend segmented into skill categories and also key business processes.
  • 50 strong cross-functional team of technical and sourcing people built in non-collaborative culture.
  • 1-3-5 year strategy created and implemented that involved the creation and selection of an alliance solution.
  • More than 200 implementable opportunities generated, including £11m of quick wins.
  • Strategy delivered 22% cost reductions over 3 years on a £750m cost base, with 5% cost-out in
    year 1. 5% cost-out in year 1.
  • Considerable improvements also made to end-customer satisfaction through process improvements.
  • Remote coaching set up for Asian Procurement team.

 

Delivery of the Programme – High Level Illustration of Structure and Content

Phase 1
Case for change
Phase 2
Research & Analysis
Phase 3
Strategy
Creation
Phase 4
Supplier Selection
Phase 5
Implementation
6 weeks 8  weeks 8 weeks
16 weeks
12 weeks
Activities:
  • Establish cross-functional team.
  • Engage internal stakeholders.
  • Analyse current situation.
  • Build initial case for change.
Activities:
  • Run 5 internally focused workstreams.
  • Analyse processes & skill categories.
  • Central team engage supply market.
  • Benchmark peer sourcing strategies
Activities:
  • Create skill & process level mini-strategies.
  • Create macro level breakthrough strategy.
  • Combine strategies in integrated approach.
  • Obtain sign-off to recommendations.
Activities:
  • Brief supply market via RFI process.
  • Encourage formation of credible consortia.
  • Issue RFP to consortia leads & share key data.
  • Shortlist 2 suppliers for final selection.
Activities:
  • Select preferred consortia.
  • Run detailed due diligence process.
  • Establish consortia management team.
  • Manage transition & exit existing suppliers.

Programme Objectives:

  • To deliver £38m savings in 2008-09 and £100m annual savings during each of the following 5 years.
  • To maximise contribution to end customer satisfaction and retention.
  • To understand costs & drivers of supply base and shift them to a sustainable lower cost and higher quality.
  • To optimise and simplify the end-end process impacting contractor costs including work allocation.
  • To identify risks and actively assign responsibility to the most appropriate party.
  • To implement the most advantageous ways of contracting with the supply base.

Tagged by topic: Cost Reduction

Knowledge Hub
Subscribe to our newsletter?

Future Purchasing would like to invite you to receive our
monthly Viewpoint newsletter.

It contains evidence-led best practice procurement insight
guides, leadership and change management articles and
purchasing news.

Complete the form below to subscribe today...