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Situation
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- Heavy use of local contractors
- Often chosen from Yellow Pages
- 20,000 different suppliers
- Inconsistent service levels
- No system to segregating claims
- Team had little training in procurement
QP Group’s client was a global Insurance company with general consumer and business-to-business clients.
QP Group was engaged to identify opportunities for improving procurement capability across the organisation in the building's supply chain.
Historically, the client’s response to customers contacting its call centre with a potential insurance claim resulted in the employment of a local contractor visiting to inspect the damage.
No criteria were in place for the selection of contractors. They were chosen by each individual office, often from advertisements in the Yellow Pages. This practice had led to over 20,000 different firms being used throughout one country. Not only was this difficult to manage in terms of cost effectiveness and coordination, but also in the delivery of consistent service levels.
In the past, our client had also put in place a national contract with a preferred supplier. This, however, proved to be vague in terms of performance and delivery benchmarks and therefore ineffective and problematic from both sides.
In terms of internal administration and management of data on claims, our client did not have a system capable of segregating different types of claim in terms of what had caused the damage or the level of claim being made. This meant that management information on buildings, essential for the running of the business, could not be produced quickly and in the correct format.
Finally, the internal buildings team had received little professional training or education in procurement techniques and good practice. As a result, they were unable to highlight or implement changes required to streamline the process.
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Solution
- Identified gaps in skills and knowledge
- Created training and education programme
- Segregated categories into sections
- Used sourcing techniques and competitive tendering
- Defined concepts so could monitor quality
QP Group worked with the client’s team to identify specific gaps in skills and knowledge that could be filled by recruiting experienced professionals.
We also recommended a structured training and education programme for existing staff, which focused on category management and procurement techniques.
QP Group's approach also went one stage further to include facilitating the recommendations, working alongside the team to ensure that changes to practices and procedures were implemented in the most effective way.
Work was undertaken to segregate the existing large categories into workable sections, allowing data to be manipulated and presented in the most effective way. Sourcing techniques and competitive tendering were also introduced in the new sub categories to improve cost-effectiveness.
The QP Group team worked with the preferred supplier to tighten up the contract and implement procedures that ensured a more effective working relationship on both sides. The key concepts of “quality”, “service” and “performance” were defined clearly, enabling benchmarking to monitor standards of delivery.
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Benefits
- Double-digit $million savings after five months
- Long-term strategic vision
- New cross-functional team
- Estimated final savings of triple-digit $million
QP Group achieved a number of “quick wins” after five months, resulting in double-digit $million of annualised cost savings and improved service and quality standards.
As a direct result of QP Group’s alliance, the client recognised that a longer-term strategic vision was required to introduce a cross-functional team into the organisation as well as to look more closely at the management of the building supply chain and each individual exchange within it.
The service chain also required research; including identifying what customers expected in terms of service delivery levels.
By implementing the longer-term strategic plan, estimated savings were triple-digit $million.
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