Rev­o­lu­tion­iz­ing Pro­cure­ment: How a Glob­al Steel Con­glom­er­ate Stream­lined Oper­a­tions Across Borders

INTRODUCTION

Heavy indus­try is cap­i­tal inten­sive due to the sig­nif­i­cant invest­ments required in equip­ment, facil­i­ties, and tech­nol­o­gy, as well as the ongo­ing costs asso­ci­at­ed with raw mate­ri­als, labor, and energy.

Over­all, the rel­e­vance of orga­ni­za­tion­al effec­tive­ness for pro­cure­ment func­tions of steel man­u­fac­tur­ing plants is crit­i­cal for achiev­ing cost sav­ings, main­tain­ing qual­i­ty and reli­a­bil­i­ty, and dri­ving inno­va­tion in the sup­ply chain. By focus­ing on orga­ni­za­tion­al effec­tive­ness, pro­cure­ment func­tions can help steel man­u­fac­tur­ing plants opti­mize their sup­ply chain and gain a com­pet­i­tive advan­tage in the market.

THE CHALLENGE

Our Client, one of the largest glob­al steel and man­u­fac­tur­ing con­glom­er­ates, had iden­ti­fied oppor­tu­ni­ties to improve cost effi­cien­cies and pro­duc­tiv­i­ty by inte­grat­ing the pro­cure­ment func­tions in two dif­fer­ent coun­tries. Pro­cure­ment prac­tices, process­es and sys­tems were quite dif­fer­ent between these coun­tries, and so the Client expect­ed there would be many challenges.

Con­se­quent­ly, the com­pa­ny sought assis­tance from Renoir to design a robust pro­cure­ment oper­at­ing mod­el that would address the chal­lenges and ensure a seam­less, inte­grat­ed operation.

PROJECT APPROACH & OPPORTUNITY ANALYSIS

Two Man­age­ment Action Teams (MATs) were set up in each coun­try along with a Task Force. The MATs were respon­si­ble for imple­ment­ing change in their respec­tive areas and report­ing progress week­ly, whilst a Steer­ing Com­mit­tee met fort­night­ly to pro­vide over­all direction.

The project was split in three stages, namely 

1. Assess­ment
2. Tar­get Oper­at­ing Mod­el Design
3. Roadmap Ini­tia­tives and Tran­si­tion Planning

The project start­ed with assess­ments at both loca­tions, cov­er­ing sev­en oper­at­ing mod­el ele­ments: Pro­cure­ment Strat­e­gy, Tech­nol­o­gy, Organ­i­sa­tion Design, Per­for­mance, Process­es, Sup­pli­er and Cat­e­go­ry Man­age­ment and Risk Management.

The Assess­ment Stage utilised our World Class Pro­cure­ment Mod­el to bench­mark the cur­rent pro­cure­ment prac­tices against some 203 cri­te­ria cov­er­ing the sev­en oper­at­ing mod­el elements.

Many oth­er stake­hold­ers were involved in the Assess­ment Stage includ­ing IT, Finance and HR. The joint teams reviewed, cri­tiqued and iden­ti­fied pain points asso­ci­at­ed with each cri­teri­um. Scor­ing against the 203 cri­te­ria was the out­come of joint review by the MATs and Renoir consultants.

Results of the assess­ments in both loca­tions were fed into a matu­ri­ty mod­el with lev­els rang­ing (in increas­ing matu­ri­ty) for each of the oper­at­ing mod­el ele­ments. The main find­ing from this was that one loca­tion scored main­ly in the Advanced lev­el where­as the oth­er loca­tion scored between the Devel­op­ing and Estab­lished levels.

IMPLEMENTATION

The focus of the project then shift­ed towards the cre­ation of an Inte­grat­ed Pro­cure­ment Oper­at­ing Mod­el. The high-level def­i­n­i­tion and design prin­ci­ples of the tar­get oper­at­ing mod­el were devel­oped, pro­vid­ing direc­tion for defin­ing details relat­ing to peo­ple, sys­tems, process, and tech­nol­o­gy with­out being over­ly prescriptive.

The To-Be oper­at­ing mod­el was used as a bench­mark against which the cur­rent matu­ri­ty lev­el of each loca­tion was com­pared. Work­shops with MAT mem­bers were held, and an Oppor­tu­ni­ty Log analysed in order to devel­op the plan to deliv­er the new oper­at­ing mod­el. Once val­i­dat­ed, all oppor­tu­ni­ties were con­vert­ed into spe­cif­ic and tar­get­ed ini­tia­tives span­ning both locations.

All ini­tia­tives were then reviewed in detail to assess how they impact each oper­at­ing mod­el ele­ment. The ini­tia­tives were also cat­e­go­rized accord­ing to the scale of the ben­e­fit to the organ­i­sa­tion and how dif­fi­cult they were to implement.

A tran­si­tion plan was draft­ed with the inten­tion of imple­ment­ing ini­tia­tives in stages with mile­stones. Ini­tia­tives were dis­trib­uted between the MATs accord­ing to var­i­ous cri­te­ria. Imple­men­ta­tion results and progress toward full adop­tion were mea­sured and tracked using the matu­ri­ty model.

“I did not expect the project to be fin­ished with­in the bud­get­ed dura­tion with such high-quality work, but thanks to Renoir’s gov­er­nance, firm com­mit­ment and high-quality out­put, we achieved the project objec­tives. Our engage­ment with Renoir has been high­ly ben­e­fi­cial to our organisation.”

Chief Pro­cure­ment Officer

KEY RESULTS

Work­ing with the Client, Renoir achieved the fol­low­ing results at the end of the project: