Strategic cost reduction through Procurement

Releasing the untapped benefit of procurement

You’re under pressure to control costs and be as efficient as possible. But are you missing an opportunity to use procurement to help deliver on your efficiency agenda?

The growing cost base of retail and consumer organisations

The business landscape is changing at an ever increasing rate and with rapid change inevitably come cost control challenges.

Shifting consumer expectations - Customers expect more, and it takes flexibility, agility and speed to keep up – but what’s the cost?

Impact of the National Living Wage - The new legislation adds direct and indirect costs to employment and the supply chain – how do you minimise the impact?

New channels - Interacting with customers goes well beyond the shopfloor nowadays – How do you exploit new channels and deliver value?

International expansion - Cross-border operations can be expensive and incur hidden costs – how do you manage third party spend to drive value?

Digital transformation - Over 50% of customers are digital natives and expect a seamless interaction with your platforms – how do you keep up while managing costs?

Managing third party spend

There is a cost base that many companies miss when looking for efficiencies. Third party goods and services such as marketing, logistics, IT, property and production costs can account for between 15-25% of an organisation’s total cost base but are often not given the same level of attention as other cost lines such as payroll or cost of goods.

Without this level of management focus, these costs are harder to control and can mean a number of quick wins are overlooked. Another advantage of turning the spotlight on third party spend is that efficiencies can be made while avoiding some of the complexity and trade-offs common to other areas.

Releasing the untapped benefit of procurement with PwC (infographic)

Thinking strategically about cost

You can quickly release sustainable savings, reduce operating cost and maximise operating profit if you take a strategic approach to managing your third party spend and update your procurement operating model. In this way, you can directly increase profitability and shareholder value.

The key to success is recognising that traditional approaches and business models may no longer work. It’s about having a clear, forward-thinking strategy instead of relying on short-term tactical approaches. In short, successful organisations align costs with business strategy.

This new approach uses effective strategic procurement as a business enabler. It means mitigation of both internal cost increases and certain external increases from the supply base. It also means focusing on untapped resources to release value back into the organisation to accelerate transformation.

Company score screen of the assessment

How do you compare against best practice?

PwC’s procurement maturity assessment will help you answer the following questions:

  • Do you manage third party spend as strategically as other areas of spend?
  • Could you benefit from working more effectively with your supply chain?
  • Do you control and manage your spend for third party goods and services?
  • Are you well positioned in terms of procurement maturity as a function?
  • Could you benefit from a new procurement operating model?

Hear from our clients

“The PWC team have done a great job supporting the Dixons Carphone procurement transformation programme. They have helped us bring in best practises, implement governance and rebuild our operating model, through benchmarking and external expertise but above all by working as a collaborative partner who understood the workings and requirements of our organisation through a period of enormous change. Dixons Carphone now has a strong procurement platform in place to support an ambitious FTSE100 business.” -- Paul Davis, Dixons Carphone UK&I CFL

“PwC worked with us from ideation through business case development and roll out and flexed their style throughout, bringing initial big thinking before the required process and IT know how and then finally their project management skills, which helped deliver the program with pace and urgency. The benefits delivery from the program was larger than we ever expected and aside from the financial benefit the knowledge transfer we saw has left us with a really effective change management team we could look to deploy again at any time.” -- David Spacey, Former Global CPO, Heineken

Contact us

Leon Smith
Retail & Consumer Partner and UK Procurement and Supply Chain Practice Lead
Tel: 07850 907714
Email

Gavin Bowen-Ashwin
Procurement transformation specialist with leading retail and consumer organisations
Tel: 07595 850027
Email

David Hodge
Retail procurement expert with a mix of industry and consulting experience
Tel: 07711 589134
Email

Nicola Beaumont
Experienced directs and indirects procurement lead in the retail and consumer sector
Tel: 07525926423
Email

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