We worked with a retailer who was struggling to enter new markets and deliver sales growth to meet their targets.
Their business strategy was to add more shops quickly. The quicker they could outgrow and outperform the competition, the better.
Procurement had a traditional approach to expansion - trying to find the cheapest build or fit out solution for each of the target locations.
Whilst on the face of it, the procurement team were doing their best for the business - expansion at lowest cost - the business as a whole was failing to meet it's growth targets.
It was clear to us that these two goals (speed of expansion and lowest cost) were actually in conflict.
A review of the numbers showed that the true value lay in being able to open new stores quickly. Getting a new retail outlet opened quickly, means generating sales earlier.
Every day from site selection to opening is a day of lost sales revenue; the opportunity cost was huge.
Getting a new retail outlet opened quickly, means generating sales earlier. We looked at every day from site selection to opening as a day of lost sales revenue. The opportunity cost was huge.
We recommended a shift in focus for the procurement team towards two main criteria, namely:
- speed of build, and
- asset maintainability
Looking at it that way drove the procurement team to think entirely differently. They started to focus on everything connected with getting the store running quickly and the ease with which the store would continue to operate in the future.
In other words, they shifted from minimising the set up costs to minimising the total cost of ownership.
The end results of this project were:
£millions of additional sales by opening earlier
improved customer NPS (around the quality of the stores)
ability to open even more stores (due to the lowered cost of ownership)
And, added to all that, with some category management expertise on the fit-out we brought in new suppliers and managed to reduce the fit-out costs by a staggering 25%
Disruptive procurement is a mindset change.
In this case it was a case of moving the targets for the procurement team to align them correctly with the goals of the business.
We created a different battle for the suppliers - speed and quality of delivery rather than price. And in doing so we created a new supply chain entirely aligned with the business strategy.
To discover more examples of disruptive procurement in action, download our eBook "11 thought provoking examples of disruptive procurement"