Leveraged global scale to deliver sourcing savings of $51m in six months
Our client aimed to capture sourcing savings by capitalising on its newfound scale, global presence and prominence in the market.
Procurement was managed individually at each site, rather than from a central position, which limited its buying power. A major expansion project had been completed, and a transition was required from project set up to steady-state operation.
in annual savings off the targeted $630m annual spend base
in savings from global OEM (Original Equipment Manufacturer) suppliers
in savings from sourcing OPM (Original Part Manufacturer) or credible aftermarket parts
in savings from global supply agreements for chemicals, lubricants and drilling services
in savings of parts and services from regional suppliers in South America, Africa and Australia
of spend placed on contract for better transparency and reduced workload
Determine addressable spend to identify where there is global scale and overlaps between sites and common purchasers/vendors
Establish sourcing strategy per category, such as direct negotiations, global and regional tenders, rapid sourcing on tail spend
Engage with vendors to negotiate better conditions, using the client's scale to motivate for discounts/rebates
Intensive research per market is of paramount importance
In an environment where the suppliers are facing cost inflation pressures, a simple negotiation alone is not enough to reach results
A thorough understanding of the cost base and supply market is required in order to negotiate productively
Collaborative solutions with incumbents need to be defined and implemented