COGS Reduction & Margin Improvement
Working with a leading houseware goods company to improve margins and reduce costs.
To discuss how we can help you with similar challenges, please contact Jeremy Smith.
The Problem
- Following an eight-week diagnostic period, the 4C team was engaged to deliver ambitious cost reduction and margin improvement targets.
- There was a lack of access to commercial data, which meant that buyers were not able to effectively prepare for supplier negotiations.
- The client’s core sourcing capability was not identifying alternative suppliers, restricting competitive tension with long term suppliers.
- Critical suppliers were not treated consistently and key category decisions were lacking customer and market insight.
The Solution
- The 4C team built a phased plan with each of the category leads focused on the balance of buying better, product portfolio mix and the trading strategy.
- We reviewed all spend areas and applied the 4C Procurement toolkit levers to each sub-category to fully understand the potential scope for deployment.
- Timelines and benefits phasing for each project were agreed, ensuring available time in the retail calendar and alignment to Right Customer Choice.
- We applied the baseline and savings methodology for each project to show how benefits would be measured and tracked, typically using COGS reduction, margin rate improvement or cash margin growth.
- In addition, we put governance in place to ensure that the client and the consultancy teams delivered to plan.
The Impact
- The project resulted in forecasted Programme Savings of £64m over three years, phased as £15m in the first year, £35m in the second year and £14m in the final year.
- There was a significant improvement within the incumbent team who were challenged with new approaches to sourcing and new ways of preparing for negotiations.
- We enabled sustainable change though a dashboard toolkit, which put data at the client team’s fingertips to ensure data-based decision making.