Cost Optimization
PIR has over 20 years experience of running both complex and more straightforward cost optimization initiatives. The ability to take out cost is a central part of improving any margin. With experience of more than 1000 projects PIR has attacked a majority of spend categories and fine-tuned levers for each of these. Our methodology for cost optimization is not just an elevator pitch, you get practical solutions, feet on the ground, and both top- and bottom-line result.
You can’t make good decisions with bad data. The basis of all fact-based procurement work is a Spend analysis that answers the questions; who is buying? what do we buy? where and with whom are we buying? PIR will support your organization in turning the messy data into tangible opportunities with a proven spend analysis process.
We use our value lever tree to conduct a detailed analysis of each category to identify and verify savings potential. We use a proven workshop methodology where key stakeholders, category owners and PIR’s category experts gets together in a structured process to work through each category and challenge existing ways of working to generate cost savings initiatives. When this is done a savings initiative plan is created to realize identified savings.
PIR’s strategic sourcing process is constructed to establish supplier contracts that reduce cost, add value and mitigates risks. Our skilled consultants will work together with your organization to evaluate the potential in all supplier contracts.
We will work with your team to define the demand and provide our input to the market analysis to be able to choose a sourcing strategy using our proven category knowledge, benchmarks and well proven negotiation strategies. We will also provide continues transparent and follow-up of savings in scope and generated by using tools and a proven measuring method for following savings in five confidence levels from ide to bottom line effect.
Optimizing cost is not only done through lengthy RFP processes. PIR has over the years successfully re-negotiated mid-term contracts with improved pricing, better terms & conditions or a combination of both through its Speed Sourcing process. The impact is immediate giving the customer quick wins often within current fiscal year. Having perfected the Speed Sourcing process over the years and with PIR’s own legal team to support most contracts in scope are re-negotiated and updated after just one session with each vendor making it a valuable and efficient part of many cost optimization projects.
Cost Optimization Engagements
Cost optimization of indirect spend at ICA
Summary
To adapt to a new, more challenging market, ICA underwent a significant cost reduction program and re-organization. As part of this initiative, ICA approached PIR and Aurentor for assistance in reducing their indirect spend.
The project had an immediate positive effect on the bottom-line result and will in total reduce ICA’s indirect spend by 300 MSEK. This initiated a change in how ICA works with indirect procurement by introducing category management and instilling confidence when negotiating with suppliers, thereby shifting the scale in favor of ICA.
Background
In the face of shifting market trends, with premium assortments and stores giving way to low-cost and budget options, ICA found their position challenged. To remain competitive while managing the inflations raising costs of interest and supply, the company needed an overarching cost transformation.
One of the identified cost transformation opportunities was within goods not for retail where ICA hoped to reduce their addressable spend by 5-10%.
This target was highly ambitious and demanding, challenging the entire organization to find cross-functional cost opportunities within a decentralized structure. Many tough decisions had to be made with a top-down perspective, while they at the same time needed to stay true to the company's core entrepreneurial values, with bottom-up ownership. Additionally, the company underwent a major reorganization during the cost transformation, which increased uncertainty and raised the decision-making threshold, making cost prioritization difficult.
Industry: Retail
Third Party Cost Optimization
The client wanted to identify cost saving opportunities and secure a streamlined purchasing process, whilst also making a thorough analysis of existing supplier base and open it up for competition.
Industry: Private Equity
Category Strategy Professional Services
The client wanted to develop a category strategy for professional services.
Industry: Industrial Goods & Services
Insights in Cost Optimization
Insight
Cost Out – Value In
A Procurement Done Right functions of today needs to balance the instituted cost focus with possibilities to leverage the supplier base to add value. A Category Management approach is a proven methodology to use for cross-functional teams to address spend categories with the objective to optimize cost. A more collaborative approach with Supplier Relationship Management is a great way to balance the cost focus with possibilities to drive improvements and encourage innovation.
Insight
Procurement Analytics
One of the most important Procurement capabilities is analytics, from spend analysis to savings tracking, it enables the Procurement function to create transparency that ensures value capture and avoid value leakage. Advanced analytics should provide Procurement Done Right professionals with actionable insight and foresight.
Discover More Solutions
Sourcing Advisory
PIR supports clients in all stages of the sourcing lifecycle, from strategy, through design and sourcing, transition as well as reevaluation of existing positions and building own capabilities.