The Savin'side ® method allows companies to optimise the total acquisition cost of their indirect purchases. The approach is categorised into three main stages: analysing a company's purchasing habits through six key criteria’s, implementing a progress plan and then monitoring its performance. Here is an example of a major player in the pharmaceutical industry that decided to rationalise its supplier base.
The company started by analysing both its consumption of tail spend and its supplier base across 20 sites and 8000 employees. In total, it had almost 750 general and specialist, active and inactive suppliers.
Although this figure does not include ad hoc purchases from non-contracted suppliers made outside the process, this is a substantial number in comparison to the Savin'side® sector-specific benchmarks.
Looking at the company's consumption of tail spend in detail, it appeared that no less than 20 local suppliers covering tail spend could be replaced with a general supplier without negotiating an agreement with the initial supplier base beforehand.
Indeed, general suppliers may offer similar or equivalent products from various categories (Hygiene, Safety, Packaging and Outdoor areas).
€36,000 of savings
It is important to remember that the average annual cost of managing a supplier is estimated to be between €1000 and €3000, depending on the company*. In this case, the company estimated this cost to be €1800.
20 x €1800 = €36,000
By replacing 20 suppliers offering tail spend with a single general supplier, the company was able to make savings of €36,000.
Once the Savin'side® progress plan had been implemented, the new products listed and the 20 supplier accounts closed, the company then had the option of extending this project to national, regional and one-off suppliers to make even more savings.
*Source: Manutan Group