CASE STUDY

Supermarket Spending Analysis

17
Savings
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CCM placed a procurement professional within the client's organization to drive savings, and offer an initial analysis of the supplier’s contract.

Objectives

  • The supermarket is an innovative company, and the managers overseeing the contract were interested in hearing what else could be done to strike a better deal, albeit one fair for all parties involved.
  • Gross profit margins for the grocery business are, on average, about 1%. Efficiency and centralization in operations helps to offset some of this low margin.

Solutions

  • Once the grocer gave us the go-ahead  to  proceed  with  an audit of the contract, we looked at the office products   supplier’s individual stock keeping units (SKUs), pricing and which items were on-contract and off-contract.
  • Vendors earn a larger profit margin when customers pay for products that are off-contract, and we dug into whether the grocer’s day-to-day spending was aligned with the type of products reflected on its current contract.

Outcomes

On-contract vs off-contract purchases

CCM monitored off-contract annual spending which can grow beyond the contract amount originally budgeted for.

Volume rebates

CCM examined the supermarket chain’s rebate based on
its volume of spending.

Benchmarking by product SKUs

The analysis shows a customer what they are being charged versus what others are paying.

Quarterly invoice tracking

CCM looks at every item a customer purchases quarter over quarter and whether or not these items have been marked up or if there has been a change in SKU.

Challenges

  • No formal procurement organization and strategies.
  • No strategy for spend on each on-contract and off-contract product.
  • Limited competitive market knowledge.

Results

  • Working with the supplier and the grocer on favorable  terms for everyone involved, CCM was able to re-negotiate the contract.
  • The grocer was able to not only preserve the good relationship it had with its supplier, including the co-sponsorship of the events, but also reduce its spending on office supplies by 17%.
  • With CCM’s custom software at its disposal, the grocer is also able to track usage of office products ranging from staplers and pens to paper and ink cartridges across its nearly 90 locations each month.

“Customers don’t always understand what their rebate should be based on spend volume. Contracts are often written that a percentage is given back to the customer as long as they spend a certain amount. In fact, in some cases, our fee actually comes from a percentage of that rebate.”

CCM Director of Procurement

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