At a Glance
- Faced with expansion and a challenging economic climate, the client’s existing procurement systems were focused on speed over strategic analysis, leading to numerous vendors and limited negotiation leverage.
- This case study highlights the potential for significant cost savings and operational efficiencies through a focused and well-executed procurement and vendor rationalisation strategy.
- Key success factors included a thorough initial analysis, strong leadership involvement, cross-functional collaboration with user departments, and a focus on sustainable change through revised policies and processes.
Key results
Cost savings within the procurement function achieved reduction of
27%
Reduced the total number of vendors by
47%
Cost reduction by the project's conclusion
$7.7 million US dollars
Background
Companies like the client—a leading cellular provider in Indonesia, established in the mid-1990s—rely on sourcing a wide range of technology products and services from multiple suppliers. Effective procurement and vendor management are essential for securing competitive pricing, negotiating favourable terms, and ensuring the quality of goods and services. These capabilities directly impact both the company’s bottom line and the reliability of its service delivery.
Given the critical role procurement and vendor management play in ensuring operational efficiency, any breakdown in coordination can have far-reaching consequences. One major challenge identified in the client’s supplier relationships was poor coordination—both internally across departments and externally with vendors. Additionally, an overly complex supplier base highlighted the need for vendor rationalisation to streamline operations, improve accountability, and enhance performance tracking.
Recognising the scale and impact of these issues, the client partnered with Renoir to conduct a thorough operational assessment. This analysis uncovered several process gaps and structural inefficiencies that were limiting scalability, agility, and performance.
Analysis
The client recognised the need to enhance its procurement and vendor management capabilities in response to rapid expansion and a more challenging economic landscape where cost management had become crucial.
While past procurement systems had adequately served the client, an analysis revealed that existing systems, processes, and policies within Procurement were primarily focused on expediency rather than in-depth spend analysis and vendor review. This approach led to many vendors and limited visibility into spending patterns across different areas.
Furthermore, procurement processes and policies lacked the necessary robustness for forecasting, which hindered buyers’ ability to negotiate prices effectively.
To address these challenges and identify opportunities for productivity improvement and cost reduction, the client engaged Renoir Consulting to conduct a company-wide analysis focusing on Procurement and Vendor Management.
Project Approach
Renoir Consulting adopted a structured, time-bound project approach within the client’s Procurement function to address the identified analysis findings and cultivate a stronger focus on cost reduction throughout the organisation.
The project was designed with regular review points involving the Chief Financial Officer and the VP of Procurement to ensure alignment and progress.
A dedicated ‘Management Action Team’, led by the client’s GM of Procurement, was formed to identify specific cost reduction opportunities, actively engage user departments in cost-saving initiatives, and review and revise existing systems and processes.
A critical initial step involved a 4-week in-depth categorisation of all operational expenditure (OPEX) and capital expenditure (CAPEX) across the client’s operating companies. This categorisation aimed to pinpoint areas where vendor rationalisation could be effectively implemented to scale successful strategies across the broader subsidiaries later.
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Implementation
Working collaboratively with the client’s Procurement team, Renoir Consulting identified specific CAPEX and OPEX opportunities valued at $151 million US dollars. These opportunities were then prioritised to create a comprehensive cost reduction plan, designed to deliver tangible results both during and after the project’s duration.
Recognising that sustainable cost reduction required a shift in organisational behaviour, Renoir played a key role in facilitating engagement with user departments. This collaboration focused on standardising materials and services, fostering greater cooperation between departments and empowering Procurement to proactively drive down costs.
To ensure the longevity of these improvements, Renoir worked closely with Procurement to revise policies and processes at both the headquarters and regional levels. These revisions aimed to increase user accountability regarding purchase planning and forecasting, thereby creating a more strategic and cost-conscious procurement environment.
“I would recommend a Renoir Program to any company that wishes to drive change in their organization and see bottom line results.”
-VP of Procurement and Logistics
Results
The client’s Procurement function had achieved significant and measurable results, including a 23% reduction in cost savings and a substantial 47% reduction in the total number of vendors, translating to $7.7 million in tangible cost reduction.
Beyond these immediate financial benefits, the comprehensive review and revision of procurement processes and policies have better positioned the Procurement department to engage with departments across the client’s organisation effectively.
*Client-specific details have been intentionally omitted to maintain strict discretion.
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