A commodity petrochemicals manufacturer struggled to manage sourcing and procurement activities and resources across functions and operations. They decided to conduct an assessment of the sourcing and procurement processes, organisation and total supplier spend to identify improvement opportunities.
The situation
A commodity petrochemicals (olefins, aromatics and surfactants) manufacturer struggled to manage sourcing and procurement activities and resources across functions and operations. Decisions about suppliers were fragmented across facilities, and there was little evidence of effective spending controls.
While executives believed that there were opportunities to improve sourcing and procurement effectiveness, they had very little data with which to size the prize. Ineffective procurement and inventory management resulted in missed production targets, high maintenance costs and low asset effectiveness. And in this highly cyclical business, cash in the bank continued to dwindle every month. Something had to give.
Our approach
Findings
The client decided to conduct an assessment of the sourcing and procurement processes, organization and total supplier spend to identify improvement opportunities. The assessment identified an unclear organizational structure, fragmented purchasing activities and a lack of process controls and discipline. The assessment confirmed that there were significant opportunities to reduce spend across a range of spend categories. The client decided to implement a formal sourcing and procurement program and selected MRO suppliers and contract labor as the two categories for the pilot. There was a $6 million potential benefit from consolidating spend and strategic sourcing in these categories.