A manufacturing firm with $18b in revenues transformed its procurement process from a transactional cost center into a source of strategic advantage, putting themselves on track to save $500m at the same time.
A leading $18b manufacturer wanted to evaluate its procurement processes to see if they could achieve substantial savings and other strategic benefits. Despite having $9b in annual spend, they didn't have a centralized procurement organization or a coherent procurement strategy. Without the capability to determine sources of savings or to build a procurement organization themselves, they turned to PwC for assistance.
PwC recommended the company approach sourcing as a strategic differentiator. An assessment of potential savings revealed up to $500m could be achieved over five years. Just as importantly, PwC helped the company design and build a hybrid centralized procurement organization, headed by a newly hired CPO, to help to establish that high-level strategic decisions would be made with procurement issues in mind. The firm developed tools and processes to project the ability to save--and make strategic decisions--around commodities procurement into the future.
Pilot tests on several commodities have yielded +$50m in savings and visibility of up to another $150m to be achieved. The savings range from 3% on some commodities to over 25% on others. Tools, processes and decision boards are in place to continue to identify and implement savings into the future. Most importantly, a procurement organization has been built to achieve both long term savings and other strategic benefits.
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