Accenture Consulting:

Joint Procurement

Group 2:

Abhishek Singh
Pankhoori Vidya
Pradeep Jarhad
Shahbaaz Syed
Shalini Dubey
 Case Overview
Conglomerate of 5 Oil Companies

Shift from individual to group procurement for improving procurement

capabilities

Organization restructuring, system implementation, skill development

Aiming at Cost Savings of 8% of the total spend that translates to $40mn

 Case Overview
Total Spend of the company =
$3bn
Total number of vendors = 60,000
Total number of items purchased
= 120,000
On an average, each vendor
supplies 2 items which signifies
the Supplier has more power
than the Buyer
Procurement compliance = 50%
- 60% of the total spend
No standardization of
procurement process
Sharing of Expertise and
Information will bring a
significant reduction in
Procurement Compliance
Costs
Using A T Kearney Chessboard Principle

The present case revolves

around seeking joint advantage
with the Supplier

Steps to be taken: Value Chain

Management, Value and Cost
Partnership, Integrated
Operations Planning
 Sharing and consolidation of
current production plans and
inventory and warehouse
status along with their
requirement of supplies

Value Chain Reconfiguration:

Screening various options:
performing certain steps
internally or out-sourcing,
omitting, or leapfrogging
them, and/or networking
more closely with suppliers
Key Considerations
Price Negotiation : same industry rival or,
Reduce buying same
overlapping costs
components or,
Choosing Right Involved in same kind
partner of processes

Agree on common
payment terms

Procurement
process different
across different
companies

Full cost
transparency to be
achieved
Price transparency
Joint Procurement
Increased
Transparency &
Lesser Complexity
Sharing of Best
Practices Centralized
Single Price Rate Procurement
Higher Buying &
and possibly results in Better
Negotiation Power
LOWER PRICES Information Encourage
Sharing Suppliers for
Innovation and
Procurement of development of
Decrease in total Small Quantities Long and new products
Landed Cost per can be of Collaborative
Unit significant Relationship
importance
Administrative Sharing of Skills
Cost Saving and Expertise

Single
Procurement per
Vendor
SWOT Analysis of Joint Procurement

1. Central decision making &

1.Efficient & global supply chain greater work load
2.Greater access to the market 2. May lead to delay in the
process
3.To avail volume discount
3. Loss of local existing vendors
SWOT
Analysis
1. Ability to use core competency 1. Higher mutual dependence may
of each member lead to increased risk
2. Cross functional training of 2. May have to lose some of the
employees performing employees
 Bargaining
power of buyers
Increased bargaining
power of buyer due to
standardization.
better information
availability

Threat of
Porters Threat of new
entrants
Industry Rivalry
increased degree of transparency
within industry.
substitutes
Increased

5-forces
Profitable
Market trend analysis/comparison Availability of
markets that with peers/rivals close substitutes.
yield high Sustainable competitive Relative price
Analysis returns will
attract new firms
advantage through innovation.
powerful competitive strategy.
performance of
substitute

Bargaining
power of
suppliers
Will reduce as
conglomerate can
better negotiate for
Discount
Drivers of Lower Compliance levels
Procurement/purchase
authority being given
Lack of Unclear roles
to multiple employees
manpower in within the
the organization
procurement
Unscheduled team
& Unplanned
Delay in purchase
response time Delay in
Unorganized
from the process procurement
procurement Lack of leading to process leading to
team stringent multiple delay in project
policy to unnecessary schedule.
Various points enforce
of contact for layers to
adherence decision
Vendor to norms
Lack of making
standardization
and protocol
 Be part of fishbowl
Skill strength of
conduct survey of Requirement analysis
employees and training
procurement of 5 companies
modules
department employees

Accentures
Fasten the
Role Best fitted
procurement
Price, Quantity, Procurement process
Process Transparency and identification of
software/tool
right suppliers

Standardization using
Agreeable payment
ERP system leading to Removal of multiple
terms and procurement
removal of process contracts
strategy
loopholes

Group procurement to
leverage discounted
price