Case Studies

Case Study 1

Client: Private equity owned Multi-site retailer

Challenge
A private equity owned retailer purchased a competing company with the aim of integrating the two businesses quickly. This created a short window of opportunity to optimise benefits from supplier negotiations. Additionally, increasing competition was eroding market share in some categories.

Objective
There were three key objectives:

  1. Maximise the financial benefits gained from the amalgamation of the two businesses.
  2. Improve the capability and focus of the buying team
  3. Review the supplier base - particularly in view of the fact that competitors were achieving commercial advantage by sourcing large quantities of product outside the EU.

Approach
I identified that there were three potential strategies to reducing the cost base: the first was to assertively renegotiate with the existing supply base (i.e. buy the same products from the same supplier but for less money). The second was to consolidate the supply base. This would mean that the suppliers that remained would then have larger volumes and charge lower cost prices. The third was to source private label products from outside the EU.

My approach of close partnership with the buying teams throughout the assignment created two benefits: the first was transferring my skills to the buyers. The second was that by working closely with the buying team meant that I was able to bring about positive changes right from the start.

I helped the client implement a category management approach, which although not a new concept, was not widely used in that industry. We then analysed and targeted the potential benefits at a supplier level. We commenced negotiations with the mid-sized suppliers which allowed the teams to perfect their negotiation approach and build their confidence prior to dealing with the larger more resistant suppliers.
Result
The financial target was to achieve cost savings of £900,000 in the first year and the program delivered £1.2m - of which £100,000 was received in cash within the first three months. Over three years the projected savings were forecast to be £3 million.

Most of the savings were achieved on existing products from existing suppliers and the early success certainly improved the buying team’s confidence. At the end of the programme the suppliers felt that they had been treated fairly and the supplier relationships continued positively.

The business now has a blueprint for category planning and a rigorous “buy for less” methodology built into the annual planning cycle.

In the largest category, where the client was losing market share, we negotiated a licensing deal to enable them to source products materially cheaper from China. This deal halted the client’s market share decline. The buying team subsequently reported higher motivation and went on to manage the product categories and the supply base with much more rigour.