Automation of the sourcing process of GNRF categories for the international perfume chain

Task

To simplify and automate procurement process. To collect tender-contract documentation and contacts by suppliers in a single database. To give procurement professionals a simple and usable tool for sourcing. To reduce the costs by strengthening the competitive environment and automating the process.

Client

Perfumery and cosmetics chain of stores, with 129 retail outlets in Russia and one online store.

Type of service

Procurement Automation

Period

February 2015 – Until present

Case

The procurement department headed by a new manager reporting to CFO was recently established in the company. At the same time there were no IT-tools for sourcing processes, there was no unified suppliers’ database, no system for requesting quotes and organizing bids. The supplier selection process was not transparent and not competitive. It was impossible to quickly get analytics on the events held, since tenders and quotations requests were done in paper. The CFO had the impression that the cost of non-market goods and services purchased was too high. A tool that would reduce procurement expenses without reducing service quality was needed. The head of procurement department used global cloud IT tools in his previous job, so the new company decided to introduce similar tools.

No IT tools for sourcing processes
No unified database of suppliers
No system for requesting quotations and arranging tenders were in place

The Process

1. Tool selection

Procurement department needed a tool with a functional and simple interface. At the time of selecting a tool, the company had the suppliers base, so the major requirement was to make it simple for suppliers to bid.

The client chose not to use Russian e-trading platforms because of impractical functionality and complicated procedure for supplier registration. After reviewing cloud solutions, Scanmarket eSourcing was chosen – a modern tool for sourcing from a prominent global vendor with interface in Russian and Russian-language support.

When selecting, we considered analytical data of the reputable international company Gartner, which in their report “Procurement solutions in strategic sourcing ranked Scanmarket first in terms of user-friendliness and customer focus.

After having demonstrated the tool capabilities, CFO and head of procurement service decided to conduct a pilot project to evaluate the solution functionality and payback.

Procurement department needed a tool with functional and simple interface
After the review of cloud solutions, Scanmarket eSourcing was selected
CFO and Procurement Manager decided to conduct a pilot project
2. Pilot project

We launched a free pilot event using Scanmarket eSourcing to find and select a warehousing service provider. First, commercial offers were collected, and an online assessment of non-price criteria was done using a special survey. Then we helped the client to independently conduct an online reverse tender among the suppliers and reduce purchasing spend by 36%.

As a result of the project, it became clear that the tool met the requirements for functionality and payback. At that pilot event, the company saved more money than it paid for a one-year subscription.

3. Implementation

Scanmarket was introduced as the main procurement tool in just one day. In 2 hours, we trained four employees to use the software. We adapted procurement regulations and procurement policy – all procurement projects with a value of over 500,000 rubles (~6,8K USD) were to go through Scanmarket. After implementation, users began to form tender documents directly from the system. Stakeholders were able to get information from the system, and not from paper media.

Outcomes

Every six months, we send the client analytical report on using tools and effectiveness of measures. Based on the reports, the company increases the number of categories, automates processes and disposes of paper documentation.

 

Other achievements on the project:

  • Reduction of supplier search and selection time from 8 to 3 weeks
  • Increased procurement transparency for CFO and internal auditor – availability of an “audit trail” on employees and suppliers’ actions
  • Increased user friendliness – simplified vendor search, negotiating and decision making
  • Reduction of labor costs for procurement department and initiators owing to elimination of paper workflow
  • Availability of analytics for control and decision making – data on procurement, tenders, suppliers in one system
  • Availability of reports for tender committee and internal controlling department

The company has been working with Scanmarket for 3 years The average annual savings on procurement amounted to 14%

Customer Feedback

Head of Procurement Department

“We were happy to stop working with suppliers via email. Previously, when the employee left the company, all the data was lost, now it is convenient to work, because all the information is in the system. The software is simple, but the company needs time to adapt to the new ways. For this reason, we did not have many activities, but over the time we cover more categories through Scanmarket and the payback increases. We plan to create templates for each category, so that we can instantly create and host an event and reduce the time for sourcing projects to 3 weeks.”

Tools

Insights in market, category, and functional area

  • Knowledge of non-market procurement specifics: completed 82 projects
  • Knowledge of optimal sourcing process: more than 140 projects completed
  • Own database of over 5,000 suppliers

Procurement Methodology and Best Practices

  • Methodology for purchasing automation and optimization
  • Document templates: RFI, RFP, Technical specifications, contracts
  • Best practices applied at transnational companies
  • Instructions, and checklists for users

IT tools

  • Cloud software for automation in sourcing
  • Templates for fast data uploading into the system
  • Event templates

Skills

  • Tasks and project management
  • Communications with stakeholders, vendor
  • Implementation of cloud IT-systems
  • User trainings

Project Team

Anatoliy Tsypkaikin

Project Manager

Gleb Dementiev

Project Consultant

Team members about the project

Anatoliy Tsypkaikin

Project Manager

“Implementing the tool is quick and easy. It is harder to start using the system for all categories. To do this, the leaders’ will be required, and the goal to go all the way. The management should analyze statistics that shows in which categories, and how the events were delivered, what savings were implemented, and how many suppliers were involved. Analytics gives us some information to think about. Struggling for efficiency does not stop with implementing a tool but is just the beginning".

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