Strategic Sourcing

PowerAdvocate offers customers a wide range of services to help develop an efficient, sustainable, go-to-market approach and manage category spend to deliver savings. From strategic planning to execution of sourcing events, PowerAdvocate helps to streamline processes, save time and save money all while demonstrating prudency.

Opportunity Assessments

PowerAdvocate develops high-level opportunity assessments to identify potential savings opportunities by category. We approach each category in terms of spend, number of suppliers, commodity drivers, market conditions and recent wins.

This enables PowerAdvocate to identify the top categories best suited for a detailed analysis and bring to light areas for potential consolidation strategies or for planning to hedge against commodity cost volatility.

Opportunity Assessment Reveals Millions in Savings Across 10 Categories

Situation

A leading energy company needed to achieve savings across various categories they were pursuing in 2011. The client turned to PowerAdvocate to provide key components for the process and to apply best practices.

Approach

PowerAdvocate provided strategic sourcing knowledge transfer and training to help the client achieve category savings.

  • Customized and delivered over 50 knowledge documents

  • Contributed to more than 25 categories in 4.5 months

  • Created a non-stack catalog mapped to UNSPSC

Results

The client was able to identify $6-$9M in additional savings across 10 categories to be pursued in 2011. In addition, PowerAdvocate was able to help the client achieve 7% savings on a $36M materials contract.

Category Management

PowerAdvocate provides category market insight and best practices to manage your line of business. Our category deep dive approach creates an action plan to help category managers identify and attain category savings by applying best practices with real-time supply market data.

Our category analysis provides category market trends; supplier information; labor, material, or equipment benchmark comparisons to customer rates and or costs; custom spend reports; and opportunity analysis, along with recommendations to improve category value.

 

The Category Management functionality as part of Market Intelligence has improved not only how our organization views, presents, and shares information, but it’s also enabled our buyers and category managers to devote more time to strategic vs. tactical efforts…”

- Director of Strategic Sourcing

Identified 10% in Cost Savings on $500M of Sourceable Spend

Situation

A Canadian Oil Sands Company struggled to implement a category management program. Previously decentralized, the supply chain organization had no visibility into their enterprise-wide data and needed to form effective strategies to operate as a top tier organization.

Approach

PowerAdvocate worked with the client to analyze historical spend across several business units and identify several strategic categories representing well over $1B in spend to leverage opportunities.

  • Applied industry best practices across contracting strategies and business models to reduce risk

  • Improved quality of service by implementing KPIs and supplier scorecards

  • Analyzed external supply market information and benchmarks on critical costs to identify cost savings and mitigate future risk

Results

With PowerAdvocate’s expertise, the client gained executive approval to execute category strategies ultimately identifying 10% in potential cost savings on $500M in spend.

Sourcing Execution

With solid data, opportunities identified and strategies developed, PowerAdvocate can support your go-to-market approach and deliver savings. PowerAdvocate “supercharges” procurement teams through a combination of cost savings specialists and best-in-class sourcing tools.

At PowerAdvocate, we are also intimately aware of the requirement to be well integrated with technical and project management stakeholders throughout this process. We work with energy companies to accelerate and improve the actual execution of the RFx bid events by performing them on our Sourcing Intelligence® platform. We often fully integrate with customer teams to effectively execute against the sourcing wave plans.

 

Our strategic sourcing team is now recognized as a model and sought-after training resource for the larger enterprise.”

- Vice President, Supply Chain

Sourcing Execution and eSourcing Tool Streamlines Processes and Cuts Costs

Situation

An energy company began working with PowerAdvocate as part of an Executive Cost Reduction mandated initiative. Through this process, PowerAdvocate identified an opportunity to create savings through streamlining the client’s sourcing process.

Approach

PowerAdvocate applied best practices to identify significant sourcing savings opportunities and trained buyers to sustain the savings through a new eSourcing platform.

  • Performed detailed analysis on relevant market sectors in support of plan to meet the state mandated RPS

  • Created dedicated and organized sourcing groups by categories to deliver savings

  • Developed an RFx strategy for PPA, REC and component purchases

Results

In order to sustain the savings and best practices, the client purchased PowerAdvocate’s eSourcing tool and developed enterprise-wide adoption for all of their sourcing needs.

With the help of PowerAdvocate’s technology and expertise, the client is now running an average of 600 events per year and managing a supplier base of over 1,000 with Support Desk service calls.

Cost Risk Assessment

PowerAdvocate takes a holistic approach to cost risk allowing you to better manage what you are buying (price, quality, and availability) and from whom you are buying in order to deliver and sustain savings.

  • Create cost models on equipment or services up to categories and overall projects which provide you transparency into cost drivers

  • Forecast impact on materials or services that you are working to procure

  • Strengthen your negotiations with third party Cost Intelligence data which you can customize to meet your specifications

Should-Cost Analysis Strengthens Negotiation to Avoid 18% Vendor Increase

Situation

A Midwest energy company was commencing construction of a $600M FGD retrofit to 2 units of a 4-unit coal-fired generating facility and wanted to validate vendor pricing for major scopes of work.

The client had previously completed a similar retrofit of the other two operating units of the facility 4 years earlier.

Approach

The client used the should-cost feature of Cost Intelligence® to get a detailed target price analysis for scrubber project:

  • Determined unique Cost Intelligence models for the top 20 commodity-insensitive and high-spend material categories

  • Completed should-cost analysis on proposed estimates as compared to final construction costs for similar work scopes from previously upgraded units

  • Used unit price benchmarking to validate pricing for non-similar scopes of work between previous project and proposed target price estimate

Results

Completing a quick should-cost analysis provided the client with the market insight they needed to renegotiate with the vendor. The client cited that the vendor's proposed price did not accurately reflect the true market impact on the same scope they had purchased four years prior.

  • Identified 18% in savings off of newly quoted prices when compared to historic prices for identical scopes of work
  • Identified 21% in savings for fabricated structural steel after normalizing for quantity of steel required ($/ton)

Supplier Relationship Management

PowerAdvocate works with customers to create a Supplier Relationship Management program of existing suppliers to measure and manage performance and risk. Performance may include straight-forward, easily-identifiable measures (such as on-time delivery or invoicing), or less easily quantifiable aspects of performance (innovation in service delivery to reduce costs or speed delivery of capital projects).

Risk may include many types of controllable and uncontrollable risk. Our consultants develop a customized program organized around the type of supplier and supplier objectives for measuring and managing performance on an ongoing basis, and a strategy for collecting information, whether collected from external sources, key internal stakeholders, or suppliers themselves.

The key component to any successful SRM program is to make it a repeatable process.

Supply Chain Transformation

Our transformational services focus on centralizing processes and combining strategic sourcing best-practice approaches with sustainable results through our knowledge transfer and technology. We often find the first step is to centralize spend across all categories.

With the complete spend analysis, our customers gain visibility across all spend, allowing them to locate spend and contract synergies. Our sourcing experts then work closely with our customers to evaluate the selected categories from the opportunity assessment phase, and determine the sourcing strategies necessary to capture value (e.g., category profiles, RFP design and execution, agreement design and execution, contract performance monitoring).

Our expertise, collaborative training, and skills transfer develop sustainable strategic sourcing organizations capable of identifying and delivering on savings opportunities.

Supply Chain Centralization Effort to Meet CFO Mandate

Situation

With a CFO mandated savings target of $20M, a Mid-Atlantic energy company struggled to find savings opportunities within its decentralized supply chain. The client engaged PowerAdvocate to integrate their supply chain business units to gain visibility across their generation spend and identify opportunities to achieve the savings goal.

Approach

PowerAdvocate provided expertise, collaborative training, and skills transfer to develop a sustainable Strategic Sourcing organization capable of identifying and delivering on savings opportunities.

  • Centralized the client’s spend across all categories and subcategories which allowed them to locate spend and contract synergies

  • Provided the client with a targeted assessment of categories with the most sizeable and achievable savings and worked closely with them to execute strategies to capture those savings

  • Created new processes and technology for the client to centralize the decentralized go-to-market approaches

  • Developed a sustainable Strategic Sourcing organization capable of identifying and delivering on savings opportunities

Results

Centralization of the generation supply chain organization resulted in $35M savings in two years, exceeding the CFOs mandated target.

Since 2006, the successful adoption of the PowerAdvocate Energy Intelligence Platform has allowed the team to sustain and enhance the Strategic Sourcing approach and expand it across the entire enterprise, which has accelerated the savings achieved by supply chain:

Annual Savings (2010) = $80M

Annual Savings (2011) = $110M

Demand Planning

PowerAdvocate develops forward looking demand plans that take into account current capital projects plans and expected asset maintenance activities over that period. The demand plans are developed using historical spend information, existing project planning documents, and any additional documentation that exists internally to our customers regarding expectations for future capital and operating activities.

The goal of the demand plan is to:

  • Develop comprehensive plan for future spend

  • Highlight potential challenges to achieving spend goals

  • Identify areas of potential over or under investment

  • Note areas where additional capital or personnel are required to meet needs

Cost Visibility Allows for Better Demand Planning

Situation

With a volatile market, our customer needed to improve the accuracy of revenue forecasts. PowerAdvocate was brought in to help the customer align inventory levels with peaks and troughs in demand to enhance profitability for a given category.

Approach

PowerAdvocate provided visibility to all of the client's Capital and Maintenance expenditures over 36 – 60 months using our intelligence tools. This collection of accurate and current budget data as well as forecasted capital project data was the basis of a new and improved Demand Plan.

Strategic Sourcing Effort to Meet CFO Mandate

Situation

After the major housing market collapse in 2008 destroyed revenues, a large energy company needed to cut costs. Nobody owned spend, which turned out to be a big problem when CFO mandated significant cost reductions across the enterprise.

Approach

PowerAdvocate provided to tools and expertise needed to identify enterprise-wide spend and gain visibility across categories and suppliers.

  • Broke down the organizational silos by engaging more directly with the business units

  • Sourced the right suppliers at the right price to maximize performance, quality and sustainability

  • Implemented a category management model which combined enterprise-wide spend for similar materials, goods, and services

  • Centralized supply chain processes, aligned technology and leveraged spend to achieve savings

  • Transitioned the supply chain organization to a performance-based metrics culture to more accurately measure results

Results

In two years time, the client was able to transform from a fragmented tactical-responsive organization with no ownership of spend to a center-led organization, partnering with the business units and using analytics to drive decision making.

The client has successfully identified and executed upon the CFO mandated savings target.

  • Implemented a category management model for enterprise-wide spend
  • Centralized supply chain processes and aligned technology
  • In two years the client was able to transform from a fragmented to a center-led organization
  • The client has successfully identified and executed upon the CFO mandated savings target