Retailers are facing extraordinary pressures on their cost base as they try to remain competitive in a rapidly changing retail environment. Our client, a FTSE 100 retailer, was trying to release value from this untapped £2bn to help transform their business and shortfall in profits. Goods not for Resale (GNFR) was seen as an unmanaged space adopting little or none of the strategic principles of other parts of the organisation.
Releasing £100m from the £2bn was the target set; money that could be reinvested into business-wide transformation programmes or delivered straight to the bottom line. Both were core demands of the Executive Board.
The objective of our review was to understand the way our client managed their GNFR spend and give them a benchmark operating model. The review uncovered between £78m and £138m of benefits and proposed a transformation plan to achieve those savings.
Our solution would establish a new centralised procurement function to manage all GNFR spend and release both quick wins and long-term sustainable savings.
We realised benefits of £23m while running the programme, and helped our client deliver a further £26m toward their target. This saving, directly attributable to the bottom line, could be used to address both the profit challenge and business transformation programme required both for shareholders and customers.
“This was a £10bn company, so indirect spend represented 20% of their revenue. That was also 30-35% of their cost base, so it was a very significant aspect of their costs. It covered marketing, IT, property, and facilities management – so many areas. It was by far the biggest cost initiative they were running, and the one with the biggest P&L impact.”