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Procurement Case Study – Restructuring a Vital Supply Base

By Neil Grime

The Client

  • National Materials Testing Organisation
  • Extensive & Varied Customer Base
  • Vast Array of Specialist Services Provided

The Problem

The nature of the client’s business meant that they required a wide range of highly educated and specialised personnel. Roles like geotechnical engineers, senior laboratory scientists and asbestos technicians were common across the business.

The recruitment supply base was not fit for purpose and could not support the organisation to the required level. In the addition, there was no strategy or coordination, as each of the client’s locations were all acting independently.

There were varied payment terms with some suppliers being paid within 7 days. This was having a negative impact on cash flow. In addition, the client had no clear and consistent set of business terms with suppliers leaving them commercially exposed. There had been instances where they had previously had to pay twice to fill the same role, as they were operating on the supplier’s terms.

The Brief

Develop an approved supply base that would be able to support the organisation in the long term. Negotiate and agree on consistent terms and conditions together with a more competitive and standard cost structure.

The Process

The initial step was to identify and consolidate the costs the organisation had incurred during a recent 12 month period. Each supplier was then contacted and further information was obtained to break down the costs and confirm the fees that had been incurred by the client.

Then we identify all the temporary and permanent roles the organisation required and generate a detailed specification in terms of experience and education that was required for each one.

The next step was then to identify all the suppliers that were going to be invited to tender. This was a mixture of current suppliers but also a large number of potential new suppliers identified from a period of extensive research.

A tender document was written and issued to all of the suppliers, accompanied by a representation of the client’s requirements.

The tender document explained that each proposal would be reviewed and scored against a set of specific criteria. Some of these were very specific to the area of the requirement but some of the generic points were payment terms of 30 days net and a consistent charge of 10% against the hourly rate for temporary employees and the basic annual salary for permanent roles.

Together with the client, we agreed on a scoring matrix against the criteria laid out in the tender document. Each criterion was weighted differently with the fee structure carrying the highest weighting. As the proposals were reviewed a score was applied together against each of the tender points with the reasoning behind it.

Once complete, this then developed an approved supplier matrix the client could retain and use as required.

To provide further assurances all of the supplier’s standard terms and conditions were reviewed to identify any conflict to the tender points that had been agreed upon. Where required, we then arranged for amended terms to be provided prior to the client signing them off as approved.

Result

The process developed an approved supplier that could meet the client’s requirements. We actually increased the number of suppliers from 23 to 42. This ensured that all roles were covered and that the supply base had the national coverage the client needed.

All suppliers moved to payment terms of 30 days net. A consistent set of terms and conditions had been introduced to endure the client’s business and their commercial rights were protected.

Agency fees were reduced by 34.93%

Neil Grime | UK Business Advisors (ukba.co.uk)

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