Sustained impact in sourcing

A consumer product company wanted to take a grip of its indirect spend. August supported the company in launching a transformation towards higher sourcing maturity and substantial savings.

Challenge

The consumer product company’s seasoned executive realized that their company’s historic recipe for success was no longer working. Price premium from the company’s prestigious brand was not enough to offset the increasing costs. The executive already had a good grip of their direct raw material expenses, but indirect spend was almost a black box and was scattered around the organization. Now it was time to change this.

Brave the future

At first, the joint client-August team mobilized itself around the organization to investigate how indirect sourcing was handled today. Through employing traditional face-to-face interviews, an online tool and a spend analytics software tool, we put together a holistic picture on how much the company was spending in different indirect categories and how these categories were being managed. This eye-opening big picture showed that the opportunity was much larger than initially expected. A wide array of both good practices and mishaps were identified.

The team designed a new sourcing model. By combining August’s sourcing experience and sensitivity to the organization’s specific situation, the new model stroked a balance between local accountability and knowledge vs. centralized capabilities and dedicated resources. Instead of being a quick fix, the new model was a sustainable increase in the company’s maturity in managing its indirect spend.

Finally, the team composed a roadmap for addressing the indirect categories for delivering savings and other benefits.

Impact

The executive hired a new manager to lead the company’s efforts in indirect sourcing, with a mandate to implement the newly designed sourcing model and deliver the benefits planned in the roadmap. Several years later the executive felt that the program was fully on-track and had delivered on its targets.