Case Study

Improving category performance. Delivering bottom-line impact

Strategic sourcing cuts maverick buying and consolidates suppliers

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Who we worked with

A global oilfield services company.

What the company needed

An overhaul of its maintenance, repair, and operations (MRO) sourcing, which had gotten out of hand with maverick buying, and suppliers not sticking to contracted prices or processes.

How we helped

We cleansed, enriched, and classified spend to improve visibility and pinpoint opportunities. We identified tail spend and evaluated suppliers. We leveraged the company’s sourcing platform - Ariba - to roll out all request for proposals (RFPs), introduced e-auctions, and tracked savings.

What the company got

The company identified strategic suppliers, then reduced its remaining supply base by almost 50%. It also reduced one-off purchases and improved catalog usage. The result? Savings of 15% to the bottom line.

Without a well-defined MRO sourcing strategy, an oilfield services company suffered from a high number of non-strategic suppliers, leading to increased spend. By increasing adoption of Ariba, the company’s sourcing platform, and routing spend through strategic suppliers, Genpact not only increased contract compliance but also delivered valuable savings.

Challenge

Identify strategic suppliers. Cut back on the rest.

With so many suppliers to manage across North America and Asia Pacific, the oilfield services company had some staff members who had gone rogue: They were making costly, off-catalog and one-time purchases, and sidestepping Ariba for sourcing and vendor management. Less than 20% of the MRO spend was sourced strategically. Furthermore, many suppliers weren’t sticking to contracted prices—and because MRO purchases were low value, category managers considered these contracts tail-end spend and not important. The firm needed a well-defined strategy to get it back on track.

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Solution

A three-pronged approach

The company worked with Genpact to manage its MRO spend, in part by improving supplier adoption of Ariba. Genpact knew it could also produce substantial savings by identifying opportunities to consolidate suppliers—and by making them stick to their contracted price. We delivered on three levels.

Commodity management

  • Introduced performance measures establishing how much the company was buying, who it was buying from, and at what cost
  • Developed supplier evaluation and approval criteria
  • Analyzed spend using the United Nations Standard Products and Services Code (UNSPSC) for supplier rationalization
  • Dropped suppliers below a spend threshold and those that the company rarely used

Supplier and commodity intelligence

  • Mapped supplier capabilities to the company’s needs, and provided an assessment of each supplier’s financial health and the operational risk they represented
  • Monitored the supplier market to stay abreast of new and emerging vendors, mergers and acquisitions, breakthrough technologies, and other industry innovations
  • Conducted supplier due diligence to identify alternate sources of supply
  • Developed reports with information on raw material prices, spend with incumbent suppliers, category cost structures, and a list of suppliers in the market

Sourcing operations

  • Created RFP templates and non-disclosure agreements for use with suppliers
  • Issued RFPs to suppliers, and administered the entire RFP management process, from collating and analyzing supplier responses to conducting negotiations with suppliers
  • Held training sessions to help suppliers transition from email RFP submission to the Ariba platform
  • Introduced e-auctions to find potential saving
  • Registered and onboarded new suppliers
  • Audited supplier invoices to establish compliance to contract agreements

Impact

A leap in procurement performance. A surge in productivity.

The oilfield services company revamped its MRO processes to reduce its vendor base by almost 60% and improve Ariba adoption from 20% to 90%. But that wasn’t all. Spot buying decreased, from 60% to 30%, while the productivity of the sourcing team increased by a remarkable 60%. The company identified lost savings worth 45% of the contracted amount. Suppliers began sticking to their 
contracts — and those who didn’t gave rebates.

The bottom line: With Genpact’s help, the company achieved savings of 15%.

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