Procurement as a Service, Fix and Return

Landscape

This world leading low cost airline carries over 40 million passengers annually to over 100 destinations in the US and internationally.

Challenge

In 2016, the airline announced a Structural Cost Program to investors and shareholders, targeting the delivery of $250 to $300m by 2020. Significant opportunities resided within 3rd party supplier costs, and Procurement needed to play an important role in delivering on the savings target.

Besides deep functional expertise and eagerness to roll up their sleeves and get things done, what I really appreciate about our Proxima team is how seamlessly they integrate into our culture. There is absolutely no “us” vs “them” mentality – we are one Sourcing team, working towards a shared goal.

The client’s existing procurement capabilities were oriented more towards administration and tactical purchasing practices. Successful delivery of the savings target would require rapid deployment of a different type of procurement capability and capacity that could identify, deliver, and maintain the savings.

Proxima was engaged to build a service model that could “fix and return” Procurement, while bringing experience to accelerate cost reduction and support other key investment programs.

Our Approach

We started the engagement by delivering a small number of discrete projects for key business stakeholders. This targeted start was designed to demonstrate a different type of procurement experience, one that could bring challenge and insight as well as balance quality and cost considerations. The success of the initial project work accelerated demand for support from the client.

We then deployed an interim CPO and a team of senior leads who could build senior relationships and assess and mentor the existing team. Having defined a change journey, we ran a number of structural improvements to the function in the course of business as usual service delivery.

Outcomes and Deliverables

Together we have fundamentally changed the value proposition. Procurement is a business partner and the organization has a true desire to engage and collaborate. We moved the function from owning a transactional process to being a strategic contributor, trusted by the business to act on its behalf. In the course of the engagement, we delivered nearly $70m of value, encompassing both OPEX savings and revenue generating activities. We also delivered a number of other benefits:

  • Service Model – created and embedded a new Procurement operation and service model, culturally aligned with the business.
  • Relationship Management – deployed senior specialists to strengthen internal relationships and integrate planning cycles.
  • Digital Operations – digitized the source to pay process by embedding new operational practices and best in class technology.
  • Category and Supplier Management – rolled out Category Management and SRM into the Procurement team, creating more structured planning and stronger relationships.

All this was achieved while delivering Procurement as a Service, with Proxima’s interim CPO leading the function, and Proxima filling key roles and deploying flexible knowledge and expertise as required to address a wide range of spend categories.