Procurement Transformation

Client: Leading Rail Freight Operator
Background

Our client is Australia’s leading rail freight operator and a top 50 ASX company. Over the previous five years the company had embarked on a large scale transformation journey from a government owned enterprise to an ASX listed company, with a commensurate shift from operationally led to commercially focussed.

As the opportunities for savings through restructuring had largely been captured, the company was looking for further savings opportunities, including looking to Procurement to find ways to significantly reduce external spend.

Challenge
  • During the period since privatisation, Procurement had undergone significant change in terms of leadership, structure and culture and this had impacted both the performance of the function and the perceived value by the business.
  • GRA was engaged to design and lead a company-wide Procurement Transformation program targeting procurement savings in excess of $100m to be delivered within 2 years, as well as significant service improvement.
Approach

The approach was designed to be highly collaborative in order to engage a recently restructured Procurement department and re-establish stakeholder relationships with the business.

Through a series of workshops with the Procurement Leadership Team we established the Transformation Roadmap, which addressed the following:

  • Procurement policy, procedures and governance
  • Procurement strategy and operating model
  • Spend analysis, category definition and management
  • Supplier segmentation and performance management
  • Contract management
  • Performance reporting
  • Systems improvement
  • Master data remediation

Concurrently with the Transformation Roadmap we supported the client in an ambitious program to deliver a significant reduction in external spend.

Outcome

Initiatives delivered under the Procurement Transformation delivered the following improvements:

  • Roadmap identified total procurement savings opportunity of $120m; implemented initiatives delivered $75m in the first 12 months
  • Revised Procurement strategy and operating model
  • Category definitions, strategies and management plans
  • Improved processes for supplier and contract management
  • Performance management framework and reporting dashboard
  • Updated Procurement policy and procedures
  • Improved system controls to drive improved process and contract compliance
  • Cleansed master data

At the time of writing the following improvements were in process:

  • Selection of a software solution to deliver improved process efficiency and transparency for Sourcing, Contract Management and Supplier Performance Management
  • Increased focus on contract management and supplier performance management
  • Tighter integration with Supply Chain to deliver further benefits to the business
     

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Testimonials

"GRA conducted a very thorough analysis and provided recommendations within an ambitious timeframe... GRA helped us improve morale and productivity almost immediately while giving us a roadmap for strategic planning as it relates to our warehouse operations."

– Larry Fells, Managing Director, Liberty Medical Pty Ltd

Typical results

  • 20-40% inventory investment reduction
  • increased service levels ranging up to 99.9%
  • 10%-15% reduction in supply chain operating costs
  • 5%-20% spend management savings
  • the ability to fund business initiatives from operating cash flow (OCF) improvements
  • improved return on capital employed (ROCE)
  • a minimum 3:1 ROI (10:1 to 30:1 typical)