Driving strategic, sustainable savings in procurement and logistics

Improve specifications, contracts, supplier and parts optionality, and data quality

This story is for CEOs and PE firms who:

1. Must manage their costs more efficiently and effectively to remain competitive
2. Need to look at their procurement and logistics more strategically
3. Want to upscale their procurement supply chain organization and ensure sustainability

The challenge

In a declining market, with an internal procurement team that operated in a largely tactical manner, the onshore drilling rig company was finding it difficult to manage costs. Pressure from the external market and acknowledged internal inefficiencies were making it difficult for the company to stay competitive. Even when they had the right information and tools, their staff failed to use them properly; for example, they would routinely override and massage information in the system. As a result, no one fully trusted the data, creating a loop in which the data overrides and distrust fed off each other. SGS Maine Pointe offered a combination of skills in areas where the company realized it needed help to find cost savings opportunities. Those skills included data analytics, strategic procurement, and in-depth knowledge of industry suppliers and standards.

SGS Maine Pointe delivered:

• A focused category strategy approach and a supply market analysis to determine the top competitive suppliers 
• A de-risked supply chain through supplier and product optionality, which introduced competitive alternatives to about 30% of their suppliers 
• A comprehensive contracting strategy: competitive RFPs and 1- to 3-year contracts with defined service levels, pricing controls, joint process improvements, and similar criteria spelled out 
• Rigorous transition plans to ensure continued enforcement of contract terms 
• Assessment and analysis of the company’s data analytics to reveal gaps, cleanse the data, and improve credibility of the data 
• PMOS, LMOS, and workshops and coaching specifically for category managers, in addition to 40 hours of training for the procurement team

Lessons learned for other CEOs

• Supplier optionality is critical for conditioning suppliers, as well as reducing costs 
• Contracts should be structured to deliver maximum value 
• Procurement organizations can be trained to find and deliver more profitable supplier and category strategies

The Results

• $17 million in annualized benefits, an average of 15% savings on addressed categories
• Exceeded expected savings in over 25% of categories
• De-risked supply chain by engaging more suppliers in sourcing process
• Optimized and lowered prices for logistics through strategic supplier management
• Introduced parts optionality to reduce costs, while maintaining specifications
• Consolidated the supply base, reducing the overall number of suppliers
• Implemented strategic sourcing across high-spend categories, as well as new procurement and logistics management operations systems (PMOS and LMOS)
• Provided training and coaching in SGS Maine Pointe’s six-step strategic procurement process, including negotiations and development of category strategies 
• Developed contracts that were aligned with industry best practices