To deliver maximum value to investors in advance of a potential merger, a leading US educational publisher wanted to reduce costs significantly – and quickly. While the business was skeptical of procurement’s ability to deliver savings and add value, Efficio exceeded all expectations.
The educational content, technology, and services provider had announced plans to merge with a major competitor. In preparation for the merger, Efficio was engaged to both deliver cost reductions and create a cost-conscious culture throughout the organization. However, the business was both siloed and resistant to change.
Despite these challenges, a combination of rigorous analysis, close working relationships with stakeholders, and best-practice processes and tools saw Efficio achieve 24% cost reductions across all categories and deliver $6.7 million in annualized savings for this client. As well as these immediate, tangible results, the team transformed the approach to procurement across the business, laying the platform for continued benefits.
Headquartered in the US, this leading global publisher of digital learning platforms and online textbooks employs around 5,000 employees in almost 40 countries, with sales in over 165 countries. In advance of a planned merger with a major competitor, Efficio was asked to help find significant cost savings.
Because the company had grown through acquisitions, business units operated independently with little sharing of information or knowledge, despite many similarities between them. A small sourcing team was focused on a specific category, but this was not leveraged across the company.
As a result, there was no standardized procurement approach and no transparency of information – for example, with regard to suppliers, rates, or specific service items. Each business unit controlled how they managed and spent their budget, and focused more on maintaining existing processes than cost management.
As is typical of the publishing industry, many suppliers – and contracts - had been in place for a long time and business units were reluctant to transition to potential new vendors. In fact, with a merger on the horizon, they were resistant to any changes that could lead to business disruption.
With little experience of strategic procurement, many stakeholders were also highly skeptical that procurement could add value to their operations. The challenge for Efficio was to convince the business that the recommended changes would deliver tangible benefits.
Not only has our work with Efficio delivered savings beyond our expectations, it has also helped to elevate the procurement function as a strategic partner that adds substantial value to the business. This newfound relationship has better positioned us to take on future challenges in a more integrated and cost-conscious environment and, for that, we are very pleased.
Efficio began with an initial Opportunity Assessment which identified a potential $6.1 million of savings. However, the team also realized it needed to tailor its approach to the constraints of the business and the desire for continuity.
To create a credible incentive for incumbent suppliers to improve their offers (and a sense of urgency), Efficio developed a series of RFPs. As part of this, a comprehensive data collection process from multiple incumbent vendors was undertaken to establish a clear baseline. This led to the creation of a brand new taxonomy in key categories, including more than 8,000 individual services purchased over the last 12 months – a first for the publisher – with definitions for each activity to allow easy comparison of RFPs.
At each stage, Efficio worked closely with key stakeholders through a series of workshops to reassure them that all requirements had been covered. To meet those requirements in the most cost-efficient manner, Efficio presented business cases for using the same vendors to supply the same services across different units. In most cases, the strength of the business case and the clarity of Efficio’s analysis convinced stakeholders to make the changes, but the Efficio team also worked hard to ensure that it was comfortable using the business unit’s vendors. The workshops also helped share best practice knowledge across business units and facilitated data sharing in what had previously been a very ‘siloed’ environment.
To make sure the planned savings were achieved, Efficio also developed a savings tracking tool. This was reviewed regularly by a central team to help ensure compliance, and monitor the delivery of savings to the bottom line.
The program delivered immediate and tangible benefits that met and exceeded the objectives:
- 24% cost reduction across all categories
- $6.7 million in annualized savings – exceeding the Opportunity Assessment target
- Approximately 40% reduction in the number and complexity of suppliers
Importantly, these savings were achieved with very little impact on the existing supply chain and no disruption to business as usual – addressing the key concerns of the business.
In addition, the program has also delivered a number of longer-term benefits.
The client now has a newfound understanding of the strategic value of procurement, along with a range of best-practice tools and processes enabling further benefits to be delivered. There is also a new level of transparency across the business where procurement is concerned - for example, with regard to who is using which suppliers, for which products and services, and at what rates – and a whole new willingness to share and leverage information.
In the process, Efficio has helped develop a less siloed environment and a more cost-conscious culture within the business – helping the publisher to better meet the challenges of the future.