Development of the effective procurement function for international logistics company
A leading international logistics company with operations in UK, Norway, Holland, USA, Canada, Trinidad, Singapore and the Caspian.
Significant changes in T&Cs (from "cost plus" to "fixed rates") of the new contract between the company and it's client caused the company to review an efficiency of its operational activities. So that, if historically the company was reimbursed for all the incurred expenses and cost of operation, under the new agreement it changed and all cost associated risks were moved onto the shoulders of the company. The latter, therefore, must ensure that the cost is kept within agreed rates in the new contract in order to sustain a profitable business.
Implementation of functional excellence and corporate standards
Cost reduction of purchased goods and services
Rationalization of suppliers and consolidation of procurement portfolio
Risk mitigation and sustaining quality standards
Evaluation of skills and performance of procurement personnel
These deliverables were broken down into activities, project duration and key milestones with SMART objectives defined, required resources and responsible individuals assigned. In the course of implementation,procedures for supplier pre-qualification, tender organisation and evaluation of supplier performance were developed. According to requirements of corporate center contract templates, variation orders, signing and expenditure authorities, policies related to Single vs Sole source were standardized. All the contracts had been reviewed and for"strategic" and "leverage" contracts tenders were organized. Competence of personnel was evaluated and optimal procurement department structure, with a clearly defined responsibilities and functional accountability to a central corporate procurement function, was implemented. Global framework agreement opportunities were identified.
The project was delivered 3 month earlier and total supply chain cost was reduced by 30% or US$2m annually.