A Procurement Reset for a Manufacturer
Overview
Our client was negotiating hard on every contract and still overpaying, because the leverage was being given away long before procurement was involved.
Mohamed Azmy
Sr. Logistics and Supply Chain Consultant / fairsystems
Procurement is usually blamed for prices that were determined months earlier, when an engineer specified a part, a plant chose a supplier for convenience, or a contract renewed itself while nobody was watching. Negotiating harder at the end of that chain recovers very little. fairsystems was engaged by an industrial manufacturer to move the intervention point upstream.
The Client
Our client manufactures industrial equipment across several plants, buying a wide range of raw materials, components and services. Procurement was a capable central function, but plants retained significant local buying autonomy and engineering specified components without visibility of commercial consequence. The same component was being bought at materially different prices by different plants, and a substantial share of spend sat entirely outside any negotiated agreement without anyone being able to quantify how much.
Roadmap
1
Assess
fairsystems built a clean spend cube, reconciling purchase records across plants and normalising supplier and material naming, which had never been consistent enough to permit comparison. Our consultants classified every line to a category taxonomy and identified maverick spend, price variance for identical items and contracts renewing automatically without review. We then traced the decision chain backwards for the highest-variance categories to find where commercial leverage was actually lost, which was almost always at specification or at local supplier selection rather than at negotiation.
2
Deliver
Our team implemented category strategies for the highest-value groups, consolidating volume where fragmentation was costing money and deliberately retaining local sourcing where responsiveness mattered more than unit price. fairsystems introduced a should-cost capability so negotiations start from a modelled view of what a component ought to cost rather than from last year's price. We embedded procurement into the engineering change process so commercial consequence is visible at specification, and put contract renewals under active management with review triggers well ahead of automatic rollover.
3
Continue
fairsystems supports the client through quarterly category reviews and refreshes the should-cost models as input costs move, which keeps negotiations anchored to current economics rather than to historical prices. We continue to develop the procurement team's analytical capability so the spend cube is maintained internally. Our consultants also work with engineering leadership to keep the design-stage commercial review functioning, because that is the control most likely to lapse once the initial programme attention fades.
Solution Details
Price is decided at specification, not at negotiation.
Spend data not comparable across plants
Deliverable: fairsystems reconciled and normalised purchase records into a single spend cube, making price variance for identical items visible for the first time.
Identical components bought at materially different prices
Deliverable: Our consultants consolidated volume in the categories where fragmentation was demonstrably costing money, while protecting local sourcing where it earns its premium.
Substantial spend outside any negotiated agreement
Deliverable: We quantified maverick spend by category and brought it under agreement, starting with the categories where the gap was largest.
Negotiations anchored to last year's price
Deliverable: fairsystems built should-cost models so negotiation starts from what a component ought to cost given current input economics.
Engineering specifying without commercial visibility
Deliverable: Our team embedded procurement into the engineering change process, making commercial consequence visible at the point specification is decided.
Contracts renewing automatically without review
Deliverable: We placed renewals under active management with review triggers ahead of rollover, ending the practice of renewal by inattention.
No internal capability to maintain the spend analysis
Deliverable: fairsystems developed the procurement team's analytical capability so the spend cube is refreshed internally rather than rebuilt periodically.
Design-stage commercial review likely to lapse
Deliverable: Our consultants built the review into the engineering governance cycle with named ownership, so it survives the end of the programme.
Result:
The client now intervenes where price is actually decided. Savings came predominantly from consolidation and from specification-stage review rather than from harder negotiation, which is why they have proved durable. Maverick spend fell sharply, contract renewals are managed rather than automatic, and the procurement team maintains its own spend analysis. Engineering and procurement now make component decisions together, which was the structural change the numbers depended on.
0
Addressable spend cost reduction
0
Maverick spend reduction
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Price variance across plants reduced
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Spend under active category management
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Contract renewals under review
Testimonials
How our services bring about success
Annika Nkosi
Lead Process Analyst
fairsystems’ team brought a unique combination of skills to our business assignment and was often sought out to tackle the most complex and integrated challenges.
Marie-Anne Badeaux
Programme Manager
fairsystems will challenge your thinking, provide you with alternative perspectives and, where appropriate, actively coach/mentor/advise you to generate and co-create solutions.
Justin J. Spratt
General Manager
Fairsystems consults impeccably to understand organizational needs and then brings innovative business relevant ideas and solutions to the table.
Mohamed Bin Naser
Chief Financial Officer
I am impressed with fairsystems’ team ability to grasp complex, accounting system problems and quickly find a simple, straightforward and affordable approach.
Ella-May Robinson
HR Manager
fairsystems has an incredible gift for making the complex appear simple and without being simplistic. It is a pleasure to work with them as they always deliver to an exceptionally high standard.
Jamal Aagha
Chief Executive Officer
There are some great companies in the media industry and the social space, but we have yet to see anyone take it to the level that we have with @fairsystems.
Allen Gibson
Operations Manager
The most valuable lesson we learned is that there are no shortcuts. Every minute we spent dissecting and learning was rewarded.
