A large MLP with one of the most diversified energy portfolios in the U.S.
Energy - Midstream
Key Value Proposition
Identify those areas of spend that are significant to the company and that can be further leveraged to drive innovation and cost improvement.
Collect and Analyze Data:
- Confirm category data, interview stakeholders, understand as-is business processes.
Formulate Sourcing Options:
- Develop category definitions; create representative taxonomy structure, conduct data analysis, and spend clean-up, prioritize sub-categories; review data for 1-2 categories at level 2 data, analyze supply market
- Conduct strategy workshop and strategy formulation
- Assess category impact and supply risk; conduct spend and market analysis
- Develop sourcing strategy associated with 1x Expense and 1x PO to include bargaining power, appropriate sourcing approaches/techniques with savings hypotheses
- Document corporate goals and objectives for targeted spend and align category objectives (Team Charter)
Implement Supplier Sourcing:
- Generate supplier portfolio of qualified suppliers and determine supplier value-added capabilities
- Assess/interview potential suppliers, establish evaluation criteria, develop/ issue RFI, evaluate supplier proposals, conduct negotiations with suppliers, develop business case, recommend sourcing decision, and conduct supplier sourcing execution
- Further consolidated and leveraged spend.
- Achieved a PO/non-PO spend balance of 85%-15%, with a goal to achieve a 90%-10% balance. A 3-5% price reduction was the goal.
- Consolidated a larger portion of spend to a smaller number of key suppliers.
- In cases where specialty items were not sold direct through the key supplier, considered a buy-out provision where key suppliers are authorized to source the specialty item. This reduced the overall transaction cost of the purchase and lowered the overall total cost – even in cases where first cost may be slightly higher.
- Considered using a procurement card with level 3 reporting to capture line-item detail of non-PO spend.