Consolidating spend: One Fortune 500 food giant’s recipe for success

This Fortune 500 food and beverage giant wanted to focus on creating a healthier relationship between people and food while continuing to boost its profits. But it faced a veritable buffet of business process problems. Fragmented, inefficient processes and outdated technology had created value leakages, particularly in the company’s Indian operations When we entered into an exciting new business relationship with the company, we knew we could help it fulfill its mission.

The company knew it could save money in indirect spend areas like office supplies, computers, and equipment—and old technology that led to manual work and reduced productivity.

So we invited the people to put themselves in their consumers’ shoes with the following scenario. Suppose you were creating a menu for a family dinner. What would happen if you asked Dad to research supermarkets, sent Mom to shop, and recruited Grandma to do the cooking ? If they hadn’t consulted with one another, that would be a disaster. Yet that’s exactly what was happening on a corporate level in this company’s fragmented source-to-pay process.

We started by analyzing every aspect of the company’s sourcing, procurement, and payables operations using Smart Enterprise Processes (SEP^SM) across 24 locations, 35,000 purchase orders, and more than one million invoices. Here’s what we found:

• The sourcing team was rarely involved in finalizing decisions
• Spending across categories and plants was not consolidated
• There were no metrics in place to measure sourcing effectiveness
• There was no online catalog, resulting in too many spot purchases
• There was no preferred supplier list
• Purchase orders were transmitted manually
• More than 70% of payments were delayed
• The vendor help desk was inefficient

After conducting an in-depth analysis, our team put together a menu plan sure to result in satisfaction:

• Sourcing: We consolidated spend across brands, categories, and businesses, spicing up the team’s knowledge of management and negotiation skills, and finishing with a new and improved supplier database to be used company-wide
• Procurement: We created a shared service center to improve effectiveness, blending master data and establishing an online catalog to reduce leakage and ensure compliance
• Accounts payable—We standardized payment terms, leading to shorter payment and invoice times and an increase in early-payment discounts
• Technology: We offered perfectly paired technology systems and processes to digitize sourcing, manage contract life cycles, document and approve travel expenses, and maintain supplier networks

Our solution resulted in a cost savings of $35 million and a six-fold improvement in effectiveness. Spend visibility rose from 40% to 98%. That’s a five-star review if ever we’ve seen one.