Optimization of the product range via standardization
The company is a global maritime services group specializing in the provision of general ship supplies, inventory, and spare parts via its extensive network of more than 600 ports. The company operates in 18 countries throughout the Asia Pacific region, the Middle East and Africa, as well as Europe and North and South America.
Initial Situation
Regional Strength
The retailer has a number of regional subsidiaries that each independently serviced their own procurement needs. However, there was no overall product or product group strategy and there was no central procurement department. Furthermore, although data was available, it was unstructured. This made centralizing procurement even more challenging, as product quantities, sizes, and prices had not been consistently maintained in the system. As such, comparing data was virtually impossible.
Objectives
Optimizing Product Range and Logistics
We were commissioned to design and implement a product group strategy across all locations.
Another objective was to improve logistical flows, with a particular focus on the Spanish market.
Approach
Development of Procurement and Process Implementation
To establish a comprehensive product group strategy, the right conditions first had to be created. This meant standardizing data so that products within the same category could be compared.
During the next phase, procurement responsibilities and processes were optimized and moved to a central procurement department. Convincing the regional procurement managers of the need for a new structure was particularly challenging. However, this was achieved by involving them early in the change process and demonstrating, in real terms, that the new system dramatically simplified day-to-day work.
With the organizational conditions now in place, a coherent product group strategy was developed. By interviewing site managers, we were able to ascertain which products were required in which location, analyze procurement volumes, and define a core product range. As this core product range accounted for more than 70 percent of the total turnover, consultants made this the focal point of the new product group strategy.
Within this framework, standards and suppliers for approximately 50 products were identified across the locations.
However, the new product group strategy and the associated flow of goods, particularly for high runner products, could only be processed via a central warehouse. This meant a new central warehouse was required in Spain. In order to keep costs to an absolute minimum, two contractors were identified following an extensive bidding process and a standard central warehouse and cold store were constructed. As a result of this new centralized approach, the processing of larger batches was possible for the first time.
For example, frozen meat may now be ordered by container to the central warehouse and delivered to each individual location in the required quantities.
Outcome
Centralized Strategy and Optimized Product Range
- Procurement transformation played a crucial role in raising levels of procurement professionalism.
- The centralization of procurement processes and pooling of demand led to improved efficiency. Significant savings in the core product range were also achieved.
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