One of the largest U.S. private engineering construction companies was growing by acquisitions, and brought on Enporion to implement Spend Management. The Spend Analysis required working with multiple IT systems and data formats that present a number of challenges – one of which was retrieving and accessing important historical project pricing information for materials and services that was critical to develop job costing bids. Spend analysis reporting enabled the client to transform a manual and inefficient job costing process into a highly-automated comprehensive, and accurate historical pricing information report. Specifically, the client also realized immediate cost savings on high-spend categories such as steel plate.
| Challenge |
Compile timely information on historical prices paid to various suppliers even though data in different formats and systems. |
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- A critical component of the client’s business is developing accurate bids for large engineering projects. The client’s process to develop engineering project cost estimates hinges on the ability to obtain historical as well as latest pricing for components and services. However, this information has been difficult to extract easily. Developing pricing for bids was a long and arduous process where the reports were recreated from scratch each time a bid was needed. Moreover, even after the pricing reports were completed, their accuracy was questionable due to commodity price volatility. The uncertainty of the bid pricing created the possibility that the client was bidding too high or too low for projects, either losing potential new business or realizing less than normal profit margins.
- The client organization is comprised of acquired companies in similar lines of business. Similar lines of business imply common supply chain activities; the main challenge has been to access and analyze spend data across the group of companies, which still used legacy systems in day-to-day operations.
- The client’s various subsidiaries operated as stand-alone entities. Enterprise-wide, there were no spend management or reporting systems with an agreed upon commodity structure for the main categories/commodities being procured and managed through the supply chain department. The lack of a common categorization structure hindered the client’s ability to leverage spend from multiple business units for any sourcing efforts and there was limited shared comprehensive knowledge of shared suppliers and the materials and services being procured across the various business units.
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| Solution |
Spend Analysis with detailed reporting to quickly and easily
identify savings. |
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- Within just one week’s time, Enporion obtained historical spend data and developed a dataset with a common commodity structure that demonstrated the ability to easily increase spend visibility across all the client’s business units.
- The dataset utilized an enterprise-wide commodity structure for materials and service categories developed by Enporion and implemented in the dataset. This structure formed a basis for developing reports and analyses that were presented to the client. Several reports were developed to show the top categories of spend, the use of suppliers, and the similarities and differences across business units.
- Top spend categories were assessed for possible strategic sourcing and cost savings opportunities. For example, it was found that the client was purchasing steel plate from four suppliers at various prices. Additionally, the analysis shed light on the fact that the client’s subsidiaries were not taking full advantage of a previously sourced contract for steel plate.
 To address the challenge of developing accurate engineering project bids, a unit price detail report was created to report on historical spend data for frequently bid job components. The report allowed the client to obtain accurate pricing for job costing in minutes, rather than the weeks it previously took. As a result, the client had greater confidence in the profitability of projects, due to the timeliness of the pricing data. |
| End Result |
The ROI from aggregating one category of spend data alone paid for the cost of the spend analysis. |
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- The client was able to aggregate spend in different units of measure from its subsidiaries and developed a consolidated view for the Supply Chain Department.
- The identified key categories and spend reports helped prioritize the Supply Chain Department planning and strategy efforts. Savings were identified for a number of key items of spend.
- The client consolidated their supplier base and reduced maverick spend.
- The custom reports that were developed were a vast improvement in terms of the time it took to develop detailed cost bids based on historical prices within the procurement system for materials and services. This allowed the estimating department to develop more accurate and timely bids on future work.
- The ROI from aggregating steel plate spend with the lowest cost supplier alone paid for the cost of the spend analysis.
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