My client X has around 500+ customers and it uses 600+ suppliers to serve them. Average value of turnover per customer is £31500 without deductions while average value of purchase per customer £18110 (These figures are exclusive of Salaries and other benefits that employees receive). Add to these the cost of sales, depreciation of capital goods that are indispensible for servicing these customers, etc and you can gauge the value addition happening at X.
Average spend per supplier is £9500, not a big number; combine to this that top 10 suppliers take away 40% of business from X and you see where we are heading. It is really difficult to leverage on the scale and scope of purchases for any individual company within the group.
The group, all companies put together, purchases over 1500+ unique items, purchasing across wide geographies nationally. A supplier with strong presence in Midlands might have no presence in North, and supplier holding bastion in North might have skeletal presence in South-East or East Anglia. Add to these complexities a purchasing officer’s conveniences, necessity to keep suppliers happy for the sake of contingencies, etc then you get the picture of what I am up against. Purchasing officer here could be a field technician, purchase coordinator in office or a project manager. Also a substantial part of revenue, about 33%, is generated from contracting division whose major procurement is sub-contracted manpower.
How do you design an optimal sourcing and purchasing (S&P) strategy for the consolidated group without compromising on Quality, Speed, Dependability, Flexibility & Cost factors? But more importantly how can S&P strategy make a difference to the bottom-line? How can S&P improve cash-flow conditions for my client? How can S&P strategy align itself with the company’s short term and long term objectives? And most importantly what can S&P strategy do to enhance value to my client’s customers?
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