The client had annual consumption of 93mio€ of several commodities. These commodities were bought on requirements, and prices varied based on spot agreements. If the commodities were cheaper due to a lower global exchange rate, then the client was happy. With the former growth demand of China, these commodities became more expensive. The client never experienced such price variations and suffered a profit drain.
A detailed study of the different commodities was asked to execute by Blue Chain. Based on a risk matrix the different spend categories were defined. For each spend category the opportunities, risks and challenges were defined.
A lead buyer was appointed to every category, who developed the frame agreement with the supplier. Clear hedging and index links were negotiated which smoothened the price movements. The client incorporated these agreements in his sales contracts. Blue Chain assisted with this contractual phase and the training how to sell these agreements. Finally all commodity variances were contracted back-to-back with the sales contracts, and the profit drain was stopped.
The client didn’t want to rush to fill in a vacancy in a permanent way. They had some bad luck, because in past three years already two Directors tried to improve the supply chain.
Blue Chain filled in the position. We just expected that we would master the day-to-day operations, but after a while we kicked-off with challenging improvement projects. This would reduce the complexity for the future Director. The good connection with staff and stakeholders finally unlocked the potential the client was waiting for. Beetje kort door de bocht, belangrijke stoel maar zo/n kort verhaal….
The client lost a lot of time in the approval cycle of procurement invoices. Not only that, also their suppliers were confused. Could they accept large orders from almost everybody of the company just by electronic mail?
The client and Blue Chain restructured the procurement-to-pay system (P2P), and every day the client enjoys the benefits: an efficient ordering process, budget control, supplier know their specifications, controlled cash flow, payments according to agreements (3way match), and segregation of duties.
The P2P-proces was automated and the internal transaction cost was reduced with 60%. The client was very satisfied to have the best of both worlds: to be in control and to save money.
