Retailers are experiencing increasing uncertainty in a market of rapidly changing digital technology, inflated commodity prices, changes in consumer demand and squeezed profit margins.
Working alongside our clients, our focus is to increase efficiency by developing new organisational capabilities and implementating commercial and technological solutions.
Our expertise, insights and strategic planning enables retailers to be in a better financial position to explore and invest in new opportunities.
Change in procurement practice adds value to corporate merchandising
PCG identified price creep in major vendor product categories and then led vendor negotiations to deliver 4% total cost reductions
A national stationery retailer has over 70,000 products in range.
The Merchandising function had responsibility to negotiate, establish contract and manage its vendor base.
The Merchandising function had minimal procurement capabilities which led to uncontrolled COGs increases that were typically accepted and passed onto customers.
PCG reviewed contracts and processes of key vendors (accounting for over $400m in spend) and identified various improvement opportunities and instances of supplier gauging. PCG developed targeted playbooks (negotiation strategies and targets) to drive value.
Procurement review showed there were little control and validation methods for price increases, negotiations did not occur, relationships with vendors were not strategic and that competitive tension were not instilled due to tendencies to simply pass on cost.
Process timing were not aligned to catalogue refresh which meant that the business had already committed to product range prior to agreeing on overall cost.
PCG led negotiation sessions with key strategic vendors.
Messaging and storyline were tailored to drive the best commercial outcome with total process (strategic development to final proposal) completed in less than 2 months, delivering net 4% reduction in overall cost.