Fast and flexible cost optimization programs to deliver rapid cost reduction
Landscape
This well-established retailer has revenue in excess of $25bn per year, and they regularly attract 11 million customers per week to their 500+ stores.
Challenge
The organization was successful for a number of years, trading on traditional values and quality produce. However, they had also been slower to move on channel innovations (e.g. online, convenience, home delivery) and paid less attention to “Goods not for Resale” (GNFR) than their peer group.
As a result, leadership noted the opportunity to look at indirect supplier costs as a means of generating margin improvement and funding growth. The CFO announced an ambitious cost reduction target to investors, and Proxima was engaged to support the identification and delivery of these benefits.
Our Cost OptimizationApproach
Within days of winning a short selection process, Proxima deployed a large team of experienced procurement consultants as well as an analytics team to churn data and accelerate the team into a quick wins program. Our team immersed themselves with client stakeholders, seeking to understand their needs, then used Proxima’s benchmarks and intelligence to quickly identify and prioritize savings potential.
Proxima delivered cost optimization and reduction projects in phases, initially focusing on quicker wins then moving into more complex projects. Over the course of several phases, we flexed our category expertise in tune with the demands of the sourcing program. More latterly, we supported the client in creating their own GNFR procurement team, using Proxima’s Capability on Demand to augment or accelerate the internal team where specialist knowledge or skills were beneficial.
Outcomes and Deliverables
The relationship has been through several iterations, reflecting a partnership that’s kept pace
with changing needs at a business and functional level. The initial savings program outperformed expectations by over 40% (delivering approximately $50m) in the first year. Subsequent delivery phases continued to impress.
Bottom line cost reduction exceeded $350m in the initial four years, nearly $100m over target. In recent years, Procurement has continued to excel, delivering more complex and challenging programs, bringing the best of the market to client challenges, including:
- Significant initial savings performance and continual over delivery against targets
- Refreshed dynamic between the business and suppliers; less adversarial and more collaborative in nature
- Strong and lasting stakeholder relationships developed in an organization that had no GNFR procurement experience and was consultant averse
- Clear commercial processes and guidelines put in place, including working closely with finance to implement new budgeting and savings capture processes
For more information on cost optimization, download our brochure here.
