SCM322: Purchasing Management Case let No. 3 Top managers at a large publicly traded mining and minerals processing corporation were searching for ways to preserve profit margins in the face of rising supply costs. The company's base of operations spanned 44 locations across 24 states and Canadian provinces. While the company did have a central reporting system, individual plants independently made many of the purchasing decisions. As a result of this decentralized sourcing, the company was not able to control or coordinate their entire spend. After an initial cost analysis, an executive committee decided to target the company's maintenance, repairs, and operations (MRO) spend. While data for sourcing in these areas did exist, the company did not have the resources to properly analyze the amount of purchasing information that had been collected from the inconsistent records of entries from the various plant locations. To overcome this problem and gain strategic sourcing expertise, the executive committee engaged a consultant named "Source One" to improve their procurement efforts. The project included roughly 14 MRO spend categories. Some of the categories covered were general mechanical supplies, fasteners, electrical / electronic components, safety supplies, and lubrication products. In order to quantify and measure results, Source One conducted a spend analysis and created a baseline spend report. The comprehensive analysis and baseline report objectively identified historical purchasing patterns and identified possible sourcing. The fundamental results of the baseline process helped management to understand what they were sourcing, from whom they were purchasing, their pricing structure and terms, service level requirements, and various proactive considerations. Source One then proceeded to determine which spend categories presented potential savings opportunities. For each category, Source One conducted a market assessment and spend analysis. Preliminary results of the market assessment combined with the use of Source One's own databases indicated that material savings were achievable.. Through a combination of strategic relationships with suppliers, and extensive negotiations, Source One managed to produce an average annual savings of 14%. Furthermore, the sourcing effort helped the client company's managers improve their plant purchasers' ordering, inventory, and reporting methods. For each product category, the client, various suppliers, and Source One worked as a team to develop and implement an effective change management program. This collaboration helped the three entities to achieve successful implementation of new pricing and purchasing processes in each category. These new relationships, along with performance and compliance metrics, helped the client company to develop better systems for understanding, monitoring, reporting, and controlling their spend for each product category. As a result of this project, the client company is enjoying cost savings, better reporting systems, strong supplier relationships, and better control over total spend. Questions : 1. What are the major areas of concerns for the mining and minerals processing company? 2. How did the source one company improved the process of procurement? 3. What were the major benefits the company received upon doing this project