The client was a large multi-location financial services provider.
One area of concern for the client was whether they were procuring their IT hardware cost effectively as their approach seemed very costly and tactical in nature by requesting 3 quotes on every occasion rather than working with a strategic partner.
Whilst the process worked, there were no real relationships with the supplier base and while the variance between the quotes typically was very low, the cost of the quotation process was often greater than the savings.
The challenge was to change the strategy with the client and re-position how this category was procured.
- IT Hardware
The strategy developed was to focus on economies of scale and efficiency gains by tendering for a single source supplier on all purchases to an agreed value.
Anything above that value was to be procured via a 3 quote process. As a result a tender was issued to market leading suppliers which focused on service capabilities and margin control.
Aside from price the key focus was around the suppliers capability to service the account whether this was turning quotes around quickly or delivering equipment within the expected timescales.
The procurement process included the articulation of well drafted SLA’s/KPI’s within a contract.
A 2 year award was made to a market leading provider and a roster of suppliers were created who would provide quotes on relevant requirements above a the value level agreed.
Key to this project was to deliver significant improvements from when the internal customer requested hardware to this being configured/received and these significant improvements were very well received by the client.
The saving generated were in the region of 10% by consolidating this spend but a greater benefit was felt by the client in terms of how much time this released for them.
Contractually we did not appoint on an exclusive basis so the client was always able to test the market.
- Sustainable cost model with margin control built in
- New strategic supplier relationship developed with a much greater focus on quality of service
- Flexible procurement strategy with potential to continue to market test to ensure the cost plus agreement reached with the supplier remained competitive
- Potential to further consolidate other IT related purchases with the re-seller (e.g. software) base upon the suppliers capabilities
- 10% cost saving driven through appointing the right supplier and by leveraging spend