Re-establishing business profitability; How procurement can reset your cost base in 2024

How procurement can reset your cost base in 2024

The last three years have seen significant increases in costs that have massively impacted business profitability. Covid lockdown supply chain disruption, overdemand and supply constraints in the bounceback, raw material cost inflation, energy cost increases driven by the war in Ukraine, and now sea freight cost increases due to the Red Sea attacks have all combined to drive increases in costs to businesses which are unprecedented in the last fifty years.

Our clients are telling us the same message; they must rapidly re-establish profitability.

Procurement is the biggest profitability lever, and the quickest

Procurement cost reduction is the biggest lever to improve EBIT. Every €/$/£ saved, makes a direct  €/$/£ impact to profitability. No other organizational lever has the same direct correlation and no other commercial focus can improve profitability as quickly.

A focused program of procurement cost reduction enables organisations to, not only restablish profitability in the current year, but also to regain control of the cost base, resetting supplier relationships and reestablishing a structured roadmap of procurement activity.

Rapid Impact Cost Reduction

First focus is to generate immediate bottom-line results.Our rapid impact approach prioritizes existing suppliers and contracts; using cost analysis, benchmarking and historical linear performance pricing techniques to drive negotiations. Our experts team up with clients to deliver swift benefits realization.

• The unique H&Z Supplier Day approach ensures highly effective and programmatic management of multiple, comprehensive, and structured negotiations. Negotiation experts from H&Z provide end-to-end support for each negotiation, guaranteeing a swift commercial reset and the recovery of historical benefits.

• In cash critical situations, our Sourcing Award and PO Control Tower management ensures precise control and leverage of every euro, pound or dollar.

Strategic Procurement Value Enhancement: Lasting Impact and Results

Having generated quick financial impact, our comprehensive cost-out/value creation projects are driven by a Value Creation Plan (VCP) that defines a roadmap of supplier, sourcing and contract activity as well as category, commodity and product group strategies and specific optimization projects. Developing the Value Creation Plan with business stakeholders builds the required cross-functional collaboration for sustainable implementation.

• We accurately benchmark commodity and category maturity, providing a clear baseline of current strategies, activities and plans

• Our Lever Workshops utilize H&Z’s proprietary 360° bullseye strategy methodology brings together cross-functional teams to identify and quantify every possible potential

Drawing on our extensive expertise across direct & indirect commodity groups, we guide companies in creating and executing their Value Creation Plans. This encompasses initial data analysis of procurement volume, cross-functional leverage workshops, identification of alternative suppliers, strategic sourcing and commercial negotiations based on a coordinated strategy. Throughout this process, our professional project management, control tower, and purpose-built software solutions ensure seamless implementation.

Cost & Value Engineering (CVE) - Unleashing cross-functional cost reduction and product optimization

The cutting-edge Cost & Value Engineering (CVE) methodology employed by H&Z delves deep into product costs, analyzing components and materials to reduce expenses while preserving quality, and uncovering strategies to boost value alongside cost reduction. Product tear-down, competitor benchmarking, raw material cost analysis and physical reverse engineering techniques help scrutinize each individual component from a functional, commercial, and technical perspective. Cost & Value Engineering delivers step-change cost reduction and value creation, as well as a structured way to re-engineer high risk and supply bottlenecks.