Procurement as a value driver for Private Equity

Landscape

This is a multi-billion dollar global leader in bakery ingredients, products and services for retail and foodservice markets, as well as artisan and industrial bakeries. 

Challenge

Following acquisition by Private Equity, our client embarked on a major program of cost base optimization. The savings would not only allow the new owners to pay down debt faster, but also fund a number of growth initiatives which would accelerate top line growth and EBIDTA. 

The new owners wanted to create a centralized and global approach to procurement, which had hitherto been decentralized and local in execution. The legacy indirect procurement team consisted of a small number of individuals located in key manufacturing sites around Europe. 

Despite having strong relationships, the capability to drive rapid cost optimization and growth improvement initiatives did not exist within the in-house team. The Group CPO installed a Head of Indirects and ran a short selection process to identify a cost reduction and change partner. 

Our Approach

Proxima was engaged to build a central procurement function, firstly in Europe and latterly globally. The function needed to operate across a complex geographic landscape, reaching out into a manufacturing base that had previously been left to make their own decisions. We put in place a multi-skilled, multi-national team based out of the Netherlands and the UK, travelling regularly to key stakeholder locations. 

The team was set challenging savings targets by the new owners. We approached these by running an initial Opportunity Assessment to build a pipeline of savings activity. Once delivery was underway we were able to build credible relationships and create more integrated category plans, delivering more complex projects and the next generation of benefits.

As the reputation of procurement further built, Proxima were asked to deliver globally, relocating leadership of the account to Atlanta and recalibrating the service and targets accordingly. During subsequent years we were engaged to support divestments, further ownership changes, major factory builds and direct materials.

Outcomes and Deliverables

The function delivered across ten major markets in North America and Europe. The team exceeded all savings targets and established a pull for procurement, with stakeholders buying into the concept and quality of a central specialist team.

Over the lifecycle of the program we delivered in excess of 15% bottom line cost improvement, a significant contributor to EBITDA improvement and sale multiples. We also put in place the commercial infrastructure and capability that made the organization a better business. This included;

  • Influencing over €500m of third party spend and delivering significant cost and quality improvement whilst reducing supplier numbers by 30%
  • Supporting the build of a €20m new production line and putting in place supplier solutions that increased productivity by 23%
  • Putting in place the capability to monitor €1bn of key commodity markets and activity risk manage €200m

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