Maximize Procurement Savings

Challenges Faced by the Client

The client, a leading provider of adaptable space solutions, encountered significant procurement challenges due to reliance on a limited number of suppliers, resulting in dependency and financial vulnerability. Single-sourcing caused variable pricing and limited transparency. With 60%-70% of costs from materials, managing diverse products and maintaining a purchase history was complex. Suppliers were mainly managed by technical teams, with procurement in a supportive role. 

H&Z Approach  

H&Z embarked on a comprehensive approach to address the client’s procurement challenges and implement effective category strategies. The journey began with an extensive investigation of the supply market to uncover potential new suppliers and strategic directions. Lever workshops were conducted to identify main strategic directions and cost reduction measures.

A critical aspect was establishing the role of category manager within the organisation, pivotal for managing supplier relationships and procurement strategies. H&Z also focused on optimising 2nd-tier suppliers to enhance overall supply chain efficiency.

Supplier factory visits were organised to shift suppliers’ mindsets toward upcoming negotiations and future collaborations. Intensive preparation for negotiations followed, with targets set for each supplier and structured communication maintained to build competition.

The negotiations were executed professionally using the M-P-S principle (Maker-Pusher-Supporter), fostering strong competition and driving suppliers to offer the best terms. These efforts resulted in a more strategic, efficient procurement function capable of delivering significant cost savings.

Achieved Results

The programme led to significant improvements and cost savings for the client. Clear procurement and category targets were established, and effective category strategies were developed and implemented. H&Z created a comprehensive supply market overview for European suppliers, identifying more than 200 companies with key capabilities.

The cost reduction target of -2% to -3% was far exceeded, achieving an impressive -10%. The role of category manager was successfully implemented and coached, establishing these managers as key accounts for suppliers and internal functions. This initiative professionalised the organisation, enhancing strategy development, supplier management, and the preparation and execution of negotiations.

The hands-on approach and rigorous project management ensured that theoretical plans were translated into tangible results. This transformative effort not only achieved cost reductions but also positioned the client for ongoing success and operational excellence in procurement.