The view can be brighter from outside the box revised 2

Thinking “Outside the Box”

© Charles Eddolls 2017 1

The Buying Function Exposé

Purchasing covers the usual functions that teams of buyers end up having to do on a daily basis, thereby leaving little time to think laterally or to look at areas in procurement where their time could be better spent creating “Better Best Value”.

With the above in mind, I encourage buying teams to regularly brainstorm each supply to promote “Outside the Box” thinking as such action creates the beneficial results that we are all striving to achieve today.

With over 40 years purchasing at all levels, you will not be surprised to hear of my considerable purchasing success, and access to my thought processes could give your team ideas which may be of use to them in the future. In my exposé I address examples of some of the problems I have been asked to address.

Why “Outside the Box”?

I believe that a practical approach and drive to see things through to completion are invaluable when seeking to create benefits or when providing cost reduction solutions. Below are some examples that show such innovation when I have addressed purchasing and operational needs.



Coopers Holdings Ltd.

As operations director of the largest metal recycling company in the UK and following our buyout from London and Northern Securities, I needed to source fifty excavators each year for rehandling duties. I set out to achieve the best deal I could to rectify years of under-investment. It was important that this deal did not affect our facility, as, in the metal recycling industry, sufficient trading cash is vital.

I structured a five-year rolling contract for at least fifty rehandling excavators per year. The agreement that I negotiated gave me the ability to receive 85% first-year buybacks and payment by non-availed promissory notes due twelve months after each machine was delivered. The rehanders were maintained and warranted by the manufacturer at no extra cost. I was, therefore, able to buy new machines every year by paying 15% of their costs at the time of their return. I could also increase the numbers as required. The machines were at a fraction of true costs and as our production increased our costs reduced. I had used my purchasing power to transfer costs back to the supplier.

No deal is sustainable unless the provider also benefits. In this instance, the supplier made an immediate impression on the recycling market and created a demand for one-year-old machines. This was a win-win situation covering a five-year commitment by each party.



Electrifying Savings.

I received a call one morning from an organisation building a £100 million extension to their power generating facility. It was apparent that while undertaking this prestigious project our client had neglected to lay on electricity in their power station for the use of their building contractors.

They urgently required generators, transformers and switchgear to enable this project to continue. Their procurement team, of more than 100 personnel, had been unable to find a manufacturer to produce the items that they required in less than nine months.

They were about to incur penalties on the project and needed immediate assistance.

I assured the caller that there would be no problems, that I would revert within 48 hrs and that we would be able to supply all that was required to meet their needs within a month.

Fortunately, I had a database of potential suppliers and team of specialists with considerable in-depth knowledge of the type of equipment needed by this company.



The solution?

My team sourced previously owned equipment, and within two weeks the first batch was installed and in use. The generators, transformers and switchgear supplied had all been fully refurbished and were guaranteed for the duration of the two-year project. Deliveries were completed two weeks later, and the equipment provided met the need of the building project.

Lessons learned?

The 100+ procurement team working for my client had not considered all the options thereby excluding pre-used, reconditioned and warranted, high specification machinery from their thoughts. They had proceeded down the traditional route of “we must only buy new from known suppliers.”

The benefits?

Our actions created savings of hundreds of thousands of pounds to the client, even after allowing for the commission to our company and profits for the re-conditioners who were paid a premium to meet a very tight timescale.

What was “best value” by the end of this contract?

To have been charged high financial penalties and been left with two-year-old generators, transformers and switchgear for sale that cost £100,000’s more than they needed to pay or:

To have paid no penalties and had switch gear to sell that had cost less than new prices and was worth, in the resale market, about the same as the new ones would have been worth.

A sporting chance.

Another major organisation was extending their operating facility such that a construction project was underway costing hundreds of £millions. Unfortunately, they had neglected to consider a two-storey temporary building that was in the way of the project. This building had been used to plan the first phase of the development but was now redundant.



A sporting chance (Contd.)

Because of my recycling, history, the client, contacted me for advice on the quickest possible demolition route to rid them of this troublesome asset. I hated waste and told them I would sell these units for them.

The modular buildings took a couple of days to sell and afterwards it took 19 Lorries to move the buildings to my sales point. The buildings were sold to a heavy industrial works for part of their sports and recreation centre. This generated considerable revenue, and they were moved and paid for within two months of our instructions. The industrial works were delighted as it had saved a fortune and this purchase had enabled them to meet their promise to their workforce to provide extensive additional facilities.

Lessons learned?

What would others have done? Probably demolished the buildings as they would not have seen the potential to sell them. Had the client followed this route there would have been a considerable cost of disposal and no additional revenue.

Benefits?

What did we achieve? A considerable revenue for the client, a modest commission for my company and another happy client because the sports centre was acquired at a fraction of the new cost.



Transport Advice.

My extensive transport knowledge enabled me to advise a leading public-sector client to stop unknowingly breaking the law that could have resulted in prosecution.

Their in-house transportation specialists had not correctly evaluated the way that sub-contractors were operating their bespoke transport contracts. Thus, their staff regularly overload vehicles that were being dispatched from their sites and when moving their goods.

Saving £15 million each year.

My financial knowledge enabled me to remove historical “provision cost inclusions” in regular complex refurbishment contracts where provision costings amounted to circa £3 Million each on up to five contracts per year.

I convinced my client to stipulate the value of each provisional costing item in the tender document such that bidders quoted a total figure on each contract. By issuing tenders in this way the variable element was removed and the client received firm costs not a combination of partially fixed prices with a significant variable element.

The result was that my client made savings of circa £15 million each year and could reallocate substantial funds to other important projects.



Reverse Auctions.

I introduced the first reverse auctions to the UK Ministry of Defence and in their first competition saved them £750,000 on a £1.1 million spend (66%).

This was achieved when I restructured one of their existing contracts to meet their specific needs commercially. I also factored in an increased betterment of 14%. (80% in total) The MoD then put in place an exclusive reverse auction provision contract with my company.

Some years later and after many successful competitions for MoD the commercial arm of HM Government, The Office of Government Commerce, commissioned me to undertake a Pan Government £232 Million tender/auction to see how our process worked.

In this competition, a restructuring of their current needs and the inclusion of our prequalified suppliers netted a saving of over £100 million. (43%)

I was subsequently selected by another Government Agency to advise on, supervise and run a successful reverse auction for a £2 billion supply contract. (this detail is confidential)



Simultaneous Auctions Savings Graph.

This example shows how we ran two auctions simultaneously with joint bidders. The bidding process was consistent for 5 hours past the closure time. Only three companies were involved, and we created millions of pounds worth of savings.

Savings in General.

Savings using my commercial input and our tender/reverse auction processes have amounted to hundreds of millions of pounds and averaged over 30%. It cannot be overstressed that it is the innovative commercial stance taken in the structuring of competitions that have created the platform to make these savings not the reverse auction software in isolation.

In each contest, my team set out to highlight savings opportunities before they structured the tenders and this was supported by brainstorming and discussions with suppliers to seek their advice prior to tender.

By looking “Outside the Box,” we communicated with suppliers and detailed our findings back to all bidders prior to tender. By acting in this manner, we were commercially addressing the needs and were fully compliant with EU procurement regulations



How can you Benefit from this Information?

The advantages of direct access to specialist advice can be invaluable and to facilitate this need I offer small parcels of time in an entirely confidential environment.

As to the worth of my involvement I set out below a few examples of savings that are in the public domain.

Organisation Supply Percentage Arenson Steel Pressings 8.70 Alexander Dennis Parts Delivery 30.60 Compass Group Branded Pasta 36.73 DSCA Audio Visual 41.10 EMR Oil and Lubricants 25.72 Hellman Worldwide Courier cost 22.04 Nottingham University Leases for equipment 18.00 RUH Bath Contrast Media 63.00 RH for Neurodisability Incontinence Products 39.12 Schneider Electrics Tools 17.80 ThyssenKrupp Oil & Lubricants 37.22 Tube Lines Stationery & Printing 46.94

Whilst it is easier to follow a well-trodden path, I believe that it is far more satisfying to see a creative use of resource when this produces lower costs and provides “Better Best Value”. So, I advise you always spare a few moments to think “Outside the Box” on any project.

As a final thought, we all benefit from additional professional input and the above shows what can be achieved. I offer these benefits to interested parties at realistic costs. More detail concerning my working history is available on the following website:

www.charleseddolls.com

I respect your decisions as to external involvement and wish you well in your procurement endeavours during the coming years.

The view can be brighter from outside the box revised 2

Business

Transcript of The view can be brighter from outside the box revised 2