- Harvey Mackay
Retaining competitiveness requires constant improvement in operational efficiency. In this respect, improving performance plays a key role in company strategies. Besides cost-efficiency, operations have strategic significance also because innovations related to the supply chain or service concepts may well bring along more permanent competitive advantage.
Operations development projects typically concern purchasing, production structures and supply chains, and they aim for concrete improvement in the results. In addition to one-off savings, the goal is to secure more permanent benefits by making the necessary structural changes, developing processes and supporting the client’s own competence.
Indirect sourcing development for an industrial services company
An industrial services company was transforming its sourcing model for indirect categories (e.g. MRO*, external labor, logistics, IT, marketing, office, travel, facilities etc.). Previously, a local sourcing model had been applied to indirect sourcing – mainly due to historical reasons and the company’s decentralized business model. This had led to a rather fragmented supplier base with thousands of suppliers and low contract coverage.
In the planning phase, August’s team supported the client in defining a new sourcing strategy and sourcing model, creating a spend baseline and executing an opportunity diagnostics. In the implementation phase, August was involved in planning and execution of prioritized sourcing cases across the Nordic countries. The objective was to capture tangible financial savings and to simultaneously develop internal capabilities, tools and processes.
Addressed categories included MRO materials, external labor, logistics, outlet investments, energy and office supplies. Various supply, demand and process levers were used to capture savings. In several cases, a thorough competitive bidding process was used to optimize supplier portfolio. The project delivered 12% savings from the addressed spend.
The development of internal capabilities was supported with focused training sessions and on-the-job learning. August consultants participated in all phases of the project, including supplier negotiations, to provide expertise and proven methods for the client.
Additionally, sourcing processes and a comprehensive sourcing toolkit were developed while conducting the pilot cases. Objective was to ensure that the client’s sourcing organization would have the practices, tools and skills to continue the efforts internally after the joint pilot project with August.
* Maintenance, repair and operations
Development of a global purchasing model for an engineering firm
An international engineering firm wanted to develop its global sourcing operations and decided to revamp its sourcing organization in line with the new operating model. The expansion of the production onto new continents and improved cost-efficiency made the development of sourcing one of the central strategic development areas in the group.
August was involved in designing the new sourcing organization, in which the global distribution of sourcing and purchasing responsibilities based on spend categories represented a notable shift from the previous, localized operating model. The competence of the new sourcing organization was developed through a tailored training program. In addition, a tool kit designed to support the sourcing operations was piloted during the project.
Developing a supply chain and service concepts for a forest industry company
A forest industry company faced the challenge of improving the competitiveness of its supply chain. The plants of the corporation were far from the primary marketing areas and bringing the products to the market quickly and cost-efficiently was challenging. At the early stage of the project, it also turned out that the product range of the company was quite fragmented and all products were supplied with more or less similar terms of delivery.
Rationalizing the product range was selected as the starting point for improving the efficiency of the supply chain, as a mere development of the processes was not going to bring adequate results. We analyzed the competitive situation in a primary marketing area that had been chosen for piloting the project, and defined the requisite delivery times for each product category. Based on this, some of the products were transferred from make-to-order production to make-to-stock production. Furthermore, the division of roles between plants was changed, resulting in improved cost efficiency and freed capacity for increased sales.
The project was carried out by a team of two full-time representatives from the client organization and August consultants. This ensured competence transfer to the client organization. After the completion of the project, the personnel in the client organization independently carried out similar analyses on several other primary marketing areas.