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.
A large network of mono-brand stores offering goods of international brands. The group includes 344 stores in 36 cities of Russia.
February 2013 – Until present
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 wrong working algorithm.
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 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 developed a spot purchasing procedure and a standard 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:
The management required additional control and transparency of procurement; therefore, the responsibilities of the spot-buyer were expanded.
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:
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. Our colleagues 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.”
Insights in market, category and functional area
Procurement Methodology and Best Practices
“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.”