Spot purchases of marketing products and services for a large chain of stores

Task

The CFO came to us with the goal to streamline the process of spot purchasing – to make it competitive and transparent, optimize costs, improve document management process and reduce workload on the employees.

Client

A large network of mono-brand stores offering goods of international brands. The group includes 344 stores in 36 cities of Russia.

Type of service

Spot purchases

Period

February 2013 – Until present

Case

During the year, the company doubled the number of retail outlets and opened new mono-brand stores. Due to the rapid growth, the purchases were made in a short time with no tenders and contracts from the same suppliers. There was no procurement department in place. The expenses were managed by the business unit employees. The management suspected that the procurement process was uneconomical, and the company was overstaffed due to the incorrect working algorithm.

Purchases done quickly with no tenders and contracts
No procurement department was in place
The management suspected that the procurement process was uneconomical

The Process

1. Data collection and analysis

We reviewed contracts, process, suppliers, costs and conducted an audit of commercial terms & conditions. We found out that there were no uniform requirements for suppliers and contracts, no consolidation of purchasing volumes between the departments.

The purchases were done quickly and on a prepaid basis, for that reason, 20% of transactions did not have closing documents. The amount of accounts receivable exceeded 50 mln rubles. Contracts with suppliers did not protect the interests of the company, since they did not include the conditions on fixed prices, contractor liability, etc.

We reviewed contracts, process, suppliers, costs
We found out that the amount of accounts receivable exceeded 50 mln rubles
2. What was done

We developed a spot purchasing procedure and a standard template for contracts. We conducted training in spot purchasing for the employees. We invited new suppliers to ensure competition. We dedicated a spot buyer for the purchases of more than 100,000 rubles.

 

Spot-buyer performed the following activities:

  • Collection of requests, requirements, specs from initiators
  • Consolidation of volumes to get discounts from suppliers
  • Standardization of initiators’ requirements
  • Collection, comparison of commercial quotations and market analysis
  • Holding tenders and auctions
  • Negotiating with suppliers and presenting results to the initiators
  • Drafting contracts, coordination with employees and suppliers

3. Expansion of service scope

The management required additional control and transparency of procurement; therefore, the responsibilities of the spot-buyer were expanded.

 

Extra duties:

  • Approval of all contracts on spot purchasing
  • Keeping a register of contracts
  • Reviewing tender and contract terms
  • Drafting spot purchasing efficiency analysis on a quarterly basis. This analysis includes the amount of savings, the number of processed requests, processing time, cost and contracts’ analysis by function.

 

Outcomes

The major outcome of the project was the discipline established in one-time purchasing, budget cuts and the increased transparency in procurement processes. According to surveys, 95% employees were satisfied with the service rendered by the spot-buyer.

 

Other achievements on the project:

  • Unified procurement process for initiators
  • Initiators are relieved, since 50% of marketing requests and 90% of IT-purchases are executed by the spot-buyer
  • Reduction of prepayment level from 50% to 5%
  • 10% reduction in accounts receivable

We reduced the costs by 10-60% vs current prices

Customer Feedback

Head of Procurement

“The service helped us to put discipline in one-time, unscheduled purchases and reduce the workload on our business units. The service paid off many times. Not only we got the savings, but also achieved transparency. The suppliers’ quotations became optimal, and the choice – justified. Even in the case of purchases that were not conducted by the spot-buyer, the initiators became more reasonable in the process. Colleagues from PrECA managed to establish a uniform procurement standard based on best practices. We want to expand the service scope and add the purchases for construction and operations to it.”

Tools

Skills

  • Negotiating
  • Operational activities on requests
  • Task and project management
  • Communications with stakeholders and suppliers
  • Handling procurement documentation
  • Data collection, structuring and analysis

Insights in market, category and functional area

  • Knowledge of the “Marketing” and “IT” categories’ specifics
  • Own database of market rates by type of service
  • Own database of over 5,000 vendors
  • Database of 1,000 customer contacts

Procurement Methodology and Best Practices

  • Methodology for optimizing spot purchasing: rules, procedures, instructions
  • Document templates: RFI, RFP, ToR, contracts, surveys
  • Best practices applied at multinational companies
  • Consolidation of procurement volumes

IT tools

  • Spot purchasing automation software
  • Project management software

Project team

Anatoliy Tsypkaikin

Project Manager

Aleksander Baranov

Operational Buyer

Team members about the project

Anatoliy Tsypkaikin

Project Manager

“We developed the spot purchasing function from scratch: we created, approved, and implemented the processes. On the one hand, it was hard for the business functions, as they were dealing with procurement previously. They perceived us as the unnecessary intermediary between the internal clients and the supplier. On the other hand, the management demanded results. We focused on convenience and speed. When it was necessary to buy something urgently, it was done by the employees. If there was no urgency, we got the best quotations from suppliers, and the internal clients decided whether to accept the offers or not. This approach produced the required results.”

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