The project aimed at lowering costs further after several cost cutting projects had been carried out without reaching the goal. With Mantec’s help the company was able to reach its goal and change behaviour.
The company, having set a goal to lower its costs by 40M SEK (4.5M), managed to save 25M SEK on its own. Mantec was then hired to help it achieve the remaining reduction of 15M SEK (1.7M).
Using techniques such as benchmarking, work studies and high-level process mapping, Mantec identified substantial potential savings in purchasing methods and in service/ maintenance productivity.
Based on the results of the initial analysis, Mantec and the client jointly started work on a programme of change which included the following subprojects:
- implementation of a new, better controlled purchasing process more closely aligned to market requirements;
- introduction of purchasing groups (decentralised purchasing departments) able to take a holistic view of purchases as well as obtaining the best possible prices;
- development of a handbook for the entire purchasing process, containing routines, templates and guides; and
- development of a management control system to better measure the effect of the work done in purchasing. This enabled management to follow up on negotiating results, and whether the organisation was using the established agreements, invoices etc.
It was important not only to focus on purchasing and the purchasing process, but also to take into account how these products and services were used throughout the organisation. For example, by optimising and basing resources and working methods on actual needs, service/maintenance productivity was also improved.
The key benefit to the client was that the set goal of reducing costs by a further 15M SEK (EUR 1.7M) was attained. The project ROI was 300%. Apart from the direct cost savings, the most significant achievement of the project was to institute behavioral change throughout the organisation:
- purchasing is today a management issue with clear goals and an appropriate reporting system;
- a systematic approach to working with purchasing has also created increased cost awareness within the organisation; and
- supplier groups which take a holistic view have the knowledge about the right price as well as driving an active dialogue with suppliers.
In summary, the overall outcome after working through the project is a more efficient organisation better adapted to the needs of the company