Many organisations have been outsourcing for the last decade or more without having a set strategy in place (or have not regularly reviewed their existing one) to guide sourcing and procurement decisions. This has caused fragmented supplier portfolios, leading to more time being spent on managing suppliers and weaker bargaining positions for the customer.
When the supply chain becomes more fragmented, it becomes increasingly expensive. Buying decisions are often not reviewed regularly and softening of purchasing guidelines and exceptions lead to bloating in the supplier portfolio. To address this, Retonomy employs a two-step strategic sourcing process:
Conduct a supplier portfolio assessment
This involves collecting and analysing data on all suppliers in a certain area or throughout a company including services provided, spend, length of contract and service performance. From this analysis, we can report on the spend profile, show which suppliers are delivering best value for money, and which ones you are spending too much time managing.
Design a sourcing strategy taking into consideration
Using the results from the supplier portfolio assessment, Retonomy can recommend a sourcing strategy that takes into account corporate and departmental goals, along with future projects or regulatory requirements. This can then be used to plan the changes needed to meet your goals, including cost savings, better services or streamlining of process.
A recent review for one client found that 80% of their supplier spend went on less than 10 out of 180 companies, with 10% of the spend being spread across more than 90 suppliers. By showing the effort needed to maintain and manage each supplier, we provided a clear picture of how the client could reduce internal overhead. It also helped to explain why they were unable to manage the suppliers the same way: they simply didn’t have the manpower. This knowledge enabled them to take the decision as to which services could be consolidated and which suppliers were no longer required. The end result was a reduction in internal costs, standardised supplier management, and cost savings in their supply chain.
To find out more about how Retonomy can help you build your strategy and save money, please contact us.