This case study focusses on a financial services client that had a large facilities management spend across both the Head Office and branch locations. The supply chain had been tactically assembled over a number of years and whilst it was felt that the contracts individually were competitive the client had set the challenge to us in terms of whether there was a better way of procuring their requirements through a more strategic and consolidated approach.
In addition to engaging us to challenge the strategy, the client also wanted to ensure that they were working with a ‘best-in-class’ partner(s) once the review had concluded with clear, relevant and measurable service levels and they were receiving maximum value for money.
The client was a large, financial services provider who had a large head office and a high street presence. Over the years the client’s revenue had come under increasing pressure due to changes in the consumers buying behaviour and new market entrants.
Specifically, in relation to Facilities Management, the client was being supplied by 30 incumbent providers for services which included office cleaning, window cleaning, waste management, pest control, and hygiene services. The client was concerned that they had far too many suppliers engaged in this category and due, in part, to the spend being so de-centralised the commitment from the supply base seemed to be variable. Furthermore, the associated costs of managing the supply chain were high due to the amount of disproportionate internal resource which was allocated to this role.
In the initial meeting with the client, it became clear that the client did not want to put any boundaries or constraints around the process and encouraged a full, evidenced backed challenge of the current strategy.
A comprehensive category review was required to conclude with a market leading facilities management company or companies being appointed that could take the client forward in terms of addressing the key challenges identified. The client directed that at the close of this review the client wanted to be in a position where they were convinced, they had the right strategy, with ‘best-in-class’ providers, delivering enhanced service levels and that the fairly significant budget was being maximised from a value perspective.
- Clients revenue was coming under pressure
- Facilities Management was identified as a category to review
- There were 30 suppliers across 6 sub-categories of spend
- Service was poor in parts of the supply chain
Key to the development of the category strategy was bringing together the thoughts of the client, our thoughts and the wider experience of suppliers from the facilities management supply chain. Considering the client wanted to adopt their final strategy based upon evidence from the marketplace this was a key step ahead of the tender process. With this in mind, we facilitated a number of meetings to develop a conceptual way of thinking with the emphasis on what the strategic options are with the associated benefits and risks.
Once we had a clear understanding of the strategic options available and the benefits/risks of each, from a number of perspectives in conjunction with a clear understanding of the current service, we agreed with the client a high-level strategy which would transition them from working with 30 incumbent suppliers for the range of services, across all locations, to working with a single supplier.
In terms of the tender itself, we embarked upon an extensive process which involved us engaging with 5 market-leading providers. During this review, an extensive amount of information was shared by the client (under NDA) to enable the suppliers to put forward their best proposal based upon solid information. The tender process was quite lengthy due to the amount of data being gathered from a number of sources and the need to conduct site visits but the commitment from the suppliers remained high due to the responsiveness and openness of both ourselves and the client through the process.
Upon receipt of the tender responses, a detailed category report was drafted by ourselves for the project team and sponsor which led to subsequent presentations being held which we facilitated to ensure the client has every opportunity to explore all key components of the supplier’s proposals.
Ahead of the presentations we developed and pre-agreed with the client an evaluation criteria which was used by all presentation attendees to ensure we all consistently reviewed the key elements (e.g. company profile, service quality, digital journey, innovation and risk, and costs).
- Challenge the current way of thinking
- Meet with market leading suppliers
- Explore alternative strategies pre-tender
- Evaluate the risk/benefits of each strategy then tender the selected option
Following a comprehensive tender process, the category solution agreed with the client was to award a 3-year contract to a leading facilities management provider who could consolidate the management of the spend and deliver enhanced service through technology and pro-active account management.
This new strategy was to reduce the client’s supply base from 30 to 1 and prompted a review of the internal resource and effort required to manage this spend.
Almost immediately, the company saw significant operational improvements from a ‘best-in-class’ provider and the relationship was quickly positioned as a strategic one with the emphasis on improving the client’s service whilst looking to reduce costs on an ongoing basis.
From a cost savings perspective, the savings to the client was in the region of 26% on a like-for-like basis without incurring any associated costs of change. These savings were purely delivered from the reduction of unit rates and minor changes to the specifications. During the relationship, the service deliverables and specification will continue to be evolved and challenged by both the client and the supplier with a commitment from both parties to delivering a continuous improvement agenda.
- Award a 3-year contract to a leading facilities management provider
- Partnered with a provider who could consolidate spend
- Operational service improvements delivered
- Significant cost saving of 26%
- Potential to evolve specifications to make further savings
When the review commenced, we were encouraged by the openness of the client to leave nothing unchallenged. The client didn’t want to put any constraints in the way of a robust category review and wanted to work closely with us to ensure we built up a clear understanding of their requirements through the procurement process.
Aside from the significant benefits mentioned in the solutions section of the case study we also led the drafting of the supplier contract to ensure that all commitments made by the supplier were captured including the service specification, the service level agreement, and the key performance indicators.
Whilst the cost savings were important and impressive the value that the client most received from the review was by working with vastly more experienced and committed suppliers backed by the latest technology. In the client’s eyes, this changed the management of this category from ‘an industry in itself’ to ‘managing by exception’.
In terms of costs whilst a 26% saving was implemented this saving will continue to grow as more inroads are made by the client and supplier over the contract period. Whilst the tender focussed on challenging everything this mindset has very much continued in the supplier management arena.
In conclusion, the client was very complimentary on the service we provided to support them through this major transition.
- Sustainable and significant cost savings
- Further savings to be generated through the life of the contract
- Significant supply chain consolidation
- Improved service and technology
- Improved supplier management processes
- Internal process savings