Savings of more than 10% savings discovered through spend, category and inventory analysis
Grosvenor was engaged to conduct an organisational wide inventory, spend and category analysis, and to conduct a review of the entire procurement function to identify savings and efficiencies, and to provide a model and implementation plan for the future delivery of procurement for a large mixed utility provider.
The spend and category analysis was conducted across all expenditure on external suppliers comprising 26 higher level spend categories (grouped under construction, direct, indirect, goods supply, property and other). The overall addressable spend by procurement activities was $65m per annum.
The analysis has identified a conservative 11% in savings on external spend. The savings are a combination of price reductions through aggregating spend and market testing, reductions in volumes purchased and avoidable expenditure. All savings were verified with the business owners and category experts.
The inventory analysis identified that more than half of the stocked items ($2.8m) had not been used in the past 12 months nor reviewed for future need. The review identified opportunities to rationalise this inventory and to order on a just in time basis.
The review also highlighted opportunities to:
- move suppliers to single monthly invoicing (reduction of 59% processed per annum)
- use purchasing cards to streamline low value, high volume purchasing for field teams, with ability to reduce stores as a side benefit
- increased use of preferred supplier panels and RFQs for frequently purchased services (eg. reduction of 86% in open tenders in construction category)
- improvements to procurement planning
- improvements to contract management
- improvements to processes
- system enhancements.