Cost Reduction: Designing & implementing a quick wins delivery programme

Business Situation

What was the problem?

Solution Implemented

How did FP resolve it?

Benefits Delivered

What was delivered?
  • CPO wanted to drive a change programme using quick wins to fund it.
  • Inexperienced Procurement team with limited previous training.
  • Limited control over existing spend with many locked in deals.
  • Very short timescale of 8 weeks to deliver the savings.
  • Joint FP/Client team set up to identify a pipeline of potential cost opportunities with a 12% cost down target.
  • The scope was limited to targeted supplier negotiations.
  • Negotiation coaching workshop held using role plays to raise the ability of the negotiation team.
  • Negotiation plans developed
  • Average of 12% savings from supplier negotiations was removed from budgets as “real” savings.
  • Self confidence and profile of the Procurement team increased .
  • Stakeholder feedback was very positive with increased level of demand for Procurement involvement in other projects

Examples of Quick Win Opportunities Delivered

savings on packaging machines.
savings in lab consumables.
saving in various software products.
savings in hotel contract rates.
savings in targeted airline fares.

Approach Used to Facilitate & Coach Category Managers through the Process

Step 1 – Identify
Suppliers
Step 2 – Prepare Negotiation Plans
Step 3 – Carry Out Negotiations
Step 4 – Programme Management
  • Using spend data by supplier spend data by supplier, the top 20 suppliers in each major category area were identified
  • An opportunity analysis was carried out using a quick win framework to critically analyse the supplier contracts
  • A prioritised list of suppliers was created with a 12% overall cost saving target agreed

  • FP ran a one day Negotiation Planning workshop to prepare the team for focused supplier negotiations. This involved role playing scenarios especially regarding the opening minutes of the negotiation
  • Each category manager was coached to prepare a negotiation plan for each supplier negotiation.
  • These plans were road tested in role playing scenarios to examine the quality of the negotiation strategies.
  • Each supplier negotiation was set up over a 3 week period to ensure they could be completed by the year end.
  • Some negotiations were held over a number of sessions to review revised proposals
  • Savings were calculated on an annualised basis with contracts due to be committed by year end.
  • All supplier negotiation projects were documented in a centralised benefit tracking spreadsheet .
  • Progress was reviewed each week at a Monday Morning meeting where all CMs had to present their negotiation status.
  • All savings were validated and signed off by Finance against specific criteria with all savings eligible to be deducted from the budgets

Tagged by topic: Cost Reduction

Tagged by Sector: Pharmaceutical and Healthcare

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