Supply Chain Management Case Study

Group procurement capabilities

Problem Statement/Summary of Facts

A major Oil & Gas conglomerate (comprised of five independent companies) had completed an assessment of its procurement capability and decided on improving its procurement capability by implementing various initiatives covering organization restructuring, system implementation and skill development. One of the key initiatives decided upon was implementation of a group procurement organization to enable capturing of synergies in purchase of common items / services.

The creation of group capabilities was estimated to produce a cost savings of 8% on the addressed spend which meant $40mn savings on non-personnel related spend for next year. However, there were several problems faced by the companies:

There were several overlapping vendors, items, numerous contracts with same vendor with different pricing structures and a variety of payment terms.

On the other hand the company was facing severe compliance issue where business users were bypassing procurement function to buy on their own. One of the key reasons for non-compliance was slow response from procurement leading to longer buying cycle.

Additional Information:

Total spend for the 5 companies for non-personnel related spend is $3bn

Procurement compliance levels hovers around 50% - 60% of total spend

Total number for vendors for the 5 companies is 60,000 and the total number of items purchased was over 120,000.

Key Questions

What are the key considerations for the client to consider in deciding on the group procurement strategy?

What could be the drivers for the relatively lower compliance levels?

What could Accenture as a consulting company do to helping the client with this challenge?

Guideline:

The assessment of the case study is less so about the accuracy of the solution but more importantly about your ability to demonstrate the appropriate knowledge of frameworks, business acumen, structured thinking, and analytical skills and then synthesizes these components into a well articulated answer.