Sourcing and Procurement
Spending less to make more
Where can you improve the bottom line without taking it out on either customers or headcount? In the category that accounts for between 40 and 70 percent of the average company’s cost structure – external spending. From cost of goods sold to outsourced services to administrative supplies, every form of sourcing and procurement is under the microscope. Yet business leaders who do find savings are also finding it hard to sustain them. The costs have a way of creeping back into the system. How can you save a sourcing dollar today in a way that won’t force you to go out and save it again a year from now?
At Deloitte, our Sourcing and Procurement team offers clients the experience and skills needed to drive down the bottom line. Our professionals have a demonstrated track record of measurable, sustainable results because they deliver the category knowledge it takes to identify savings opportunities across the entire source to pay process – and the holistic thinking to help our clients achieve those savings not only while we’re there, but long afterward. By providing a broad, deep skill set, Deloitte can provide category knowledge, effective processes, benchmarking capabilities, organization and process design and technology selection and implementation skills to organizations in every industry. With our deep understanding of procurement, we can help clients transform from being transactional to strategic procurement organizations. Learn more about the offering.
Improving supply chain operations and procurement at a major paper company.
Saving the Pennies that Save Lives
Helping a non-profit with strategic sourcing.
Supply chain resilience
Supply chain resilience provides a framework for identifying and analyzing all forms of supply chain risk.
The Promise of Advanced Supply Chain Analytics
Read the article.
Tapping Value in Spend Management
Assessing management processes to control costs.
Optimizing Value from Your Business Relationships: Trust, but Verify
How a risk intelligent approach to managing the extended enterprise can help companies preserve the value of their contracts and optimize business performance.
A Practical Guide to Green Sourcing
Investigative techniques to help mitigate risk.
Procure-to-Pay and Commercial Card Programs: Next Generation Profits
Presenters' responses to select questions submitted by participants during the Webcast.
Merging Manufacturing and Sourcing Strategies: The Global Factory (Manufacturing)
Read our point of view.
Commodity Management: Profiting from Volatility (Process & Industrial Products)
Read the white paper.
Breaking Down the Barriers to Sourcing Services (Aerospace & Defense)
Unlocking the tremendous savings potential in services spend.
Meet Our People
- Jerry O’Dwyer, Principal, Deloitte Consulting LLP
- Ryan Renner, Senior Manager, Deloitte Consulting LLP
- Supply Chain Transformation
- Supply Chain Strategy
- Supply Chain Planning
- Product Development
- Manufacturing Strategy and Operations
- Logistics and Distribution
- Deloitte Analytics
- Global Benchmarking
- Contract Risk and Compliance
- Anti-Fraud Consulting
Learn More About the Offering
Reset the Context
The answer begins with a realigned view. When you look for savings from each business unit, each fiefdom circles the wagons. But when a company turns to category sourcing – all the labor, all the office supplies, all the electric motors and so on – the internal barriers fall away, and it becomes possible to structure contracts in logical patterns that invite competitive bidding from the supplier market. End-to-end management of the spending lifecycle and the internal demand that drives it can promote similar efficiency. When a company exerts strong governance over its spending, it saves dollars and keeps them saved. And when that money is tracked and reinvested, a sound procurement strategy can fund improvements elsewhere in the company.
Realizing benefits like those takes a team and a structure many companies don’t have. It also requires a view beyond unit cost, contracts and invoices. It requires a comprehensive approach to define and execute against an organization’s procurement strategy. Organizations must gain visibility into the behaviors that drive spending, so they can address it at the root and become nimble in how they manage their bottom line.
How We Can Help
At Deloitte, our Sourcing and Procurement team offers clients the experience and skills needed to drive down the bottom line. Our professionals have a demonstrated track record of measurable, sustainable results because they deliver the category knowledge it takes to identify savings opportunities across the entire source to pay process – and the holistic thinking to help our clients achieve those savings not only while we’re there, but long afterward. By providing a broad, deep skill set, Deloitte can provide category knowledge, effective processes, benchmarking capabilities, organization and process design and technology selection and implementation skills to organizations in every industry. With our deep understanding of procurement, we can help clients transform from being transactional to strategic procurement organizations.
The breadth of Deloitte’s services allows our Audit and Enterprise Risk Services practice to conduct contract audits and supplier risk assessments, our Tax practice to help clients recognize additional savings opportunities and strategies, and our Advanced Analytics team to help clients gain better visibility into their organization’s performance. We can also help define the policies and controls to enforce consistency, drive supplier and buyer compliance through contracting and procurement solutions, and assess supplier risk along the way too.
Our services include:
- Category expertise for both direct materials as well as indirect goods and services
- Procurement strategy
- Procurement organization design
- “Source to Contract” and “Procure to Pay” process design and technology enablement
- Low cost country sourcing
- Supplier risk assessments
- Benchmarking and KPI capabilities
We also use a repository of proprietary tools such as target costing models, maturity models, sourcing-on-demand technology and in-house analytics to speed each client’s path to an effective solution.
We help our clients generate benefits such as:
- Cost savings due to reduced non-personnel costs
- Typical return on project costs by a factor of 4 to 5 times
- Improved forecasting and visibility to category spend
- Purchasing and procurement organizations shifted from a tactical to strategic focus
- Potential self-funding of related business investments
Five Ways to Get More Value Now
We’ve helped many companies around the world in their efforts to improve their sourcing and procurement capabilities. Some key lessons we’ve learned along the way are:
Look elsewhere in your industry. It can be difficult to gain a better perspective on your organization’s performance without first knowing how others are tackling similar issues. You may not be as unique as you think. Your competitors won’t open their books, but you can engage your major suppliers to more effectively understand how their customers might be tackling similar issues.
Picture what your vendor base should look like. Your organization should have the right suppliers providing the right scope of services at the right price. Price is only one component of a larger strategy. Making sure your organization engages the right supply base helps keep tabs on risk as well as performance.
Learn from the initiatives others are taking. Many organizations are developing new cost-benefit strategies. For example, we are seeing more companies include savings levers such as energy consumption in their savings estimations. Price reduction is only part of the picture when evaluating savings opportunities.
Approach the procurement model that’s right for you. Procurement organizations aren’t one-size-fits-all. Companies vary in procurement maturity as well as culture within which they have to work. You need to understand where your organization falls on the curve, understand the operating model for centralized vs. decentralized decision making – then develop the procurement operating model and appropriate organization structure that will work in your culture.
Use technology to understand your spending performance. Gaining visibility can be the most obvious approach for moving your organization forward. Technologies that provide spend analysis functionality are quickly incorporating greater tools for visibility, while also expanding their tools for proactive compliance issues.
Sourcing and Procurement in Action
- A large non-profit relief organization with hundreds of local chapters throughout the U.S. wanted to reduce costs and improve efficiency. But the organization wasn’t taking advantage of its scale or brand to maximize savings across spend categories. Deloitte worked with business functions and local chapters on organization design, strategic sourcing processes and governance structures to drive compliance and sustain savings. Sourcing improvements are expected to reduce non-personnel costs by 30 percent, saving the organization more than $40 million a year.
- A major global packaging systems and paper manufacturing company wanted to solidify its competitive position and reduce costs. Our team included specialists in direct and indirect procurement, supply chain management and process manufacturing and key cost categories such as wood, chemicals, maintenance and repair operations, contract labor, packaging and freight. We helped the company develop a sourcing strategy, facilitate supplier negotiations, outsource multi-site freight management and monitor cost savings targets. Overall, the company reduced ongoing procurement costs by more than six percent, saving nearly $40 million a year. Significant reductions were achieved in all cost categories, with savings exceeding 50 percent of original spend in some areas.
As used in this document, “Deloitte” means Deloitte & Touche LLP, which provides audit, assurance and risk management related services, Deloitte Consulting LLP, which provides strategy, operations, technology, systems, outsourcing and human capital consulting services, Deloitte Tax LLP, which provides tax services, and Deloitte Financial Advisory Services (FAS), which provides financial advisory services. These entities are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.