Moving up the value chain: transforming procurement at Elm

Moving from a transactional focus to a strategic one is a major challenge for many procurement teams. Efficio helped transform Elm’s procurement function into a strategic partner, while adding significant and rapid value to the business.

Saudi Arabia’s leading IT outsourcing and consultancy provider, Elm, engaged Efficio to drive greater strategic value from its procurement function.

Efficio developed a new, best-practice operating model and undertook a comprehensive training and mentoring programme to transfer skills and knowledge to the existing procurement team, working closely with Elm staff to identify and deliver major strategic sourcing initiatives.

Background

Established in 1988, Elm is a Saudi Joint Stock Company owned by the Public Investment Fund (the investment arm of the Saudi Ministry of Finance). While they had an existing procurement function, it was focused heavily on transactional activities such as raising and approving purchase orders. With control over spend held by individual business units, the opportunities to identify and deliver cost reductions for Elm and its customers were limited. This was exacerbated by the project-based nature of Elm’s business, which made forecasting difficult.

Efficio were engaged to review Elm’s procurement organisation, policies and processes, and transform the function into a much more value-adding, strategic business unit. Cost reduction was a major focus, but not the only one.

Other objectives of the project were to:

• Improve speed and efficiency;
• Improve the skills, knowledge and capabilities of the existing team, and;
• Enable continuous improvement through better governance and performance measures.

Achieving these objectives and ensuring sustainable improvements required a holistic approach. The programme also needed to address the needs and concerns of the wider business, given a reluctance in some areas to move to a more centralised procurement model.

Approach

Efficio began by conducting a granular assessment of Elm’s current procurement operating model, including:

• Mapping of existing processes
• Extensive stakeholder interviews
• Detailed reviews of relevant documents, e.g. policies, process manuals, authority matrix etc.
• Analysis and benchmarking of organisational structure, roles and responsibilities.

At the same time, Efficio analysed and categorised Elm’s spend to identify potential opportunities and negotiating levers.

Following this assessment phase, Efficio designed and implemented a two-pronged delivery programme. The first step was to develop a new, best-practice operating model. This was rolled out to the whole organisation via a user-friendly ‘How to Buy’ guide, along with an updated procurement manual and policies. The new operating model was supported by Efficio’s proprietary technology tools, along with a comprehensive training programme for the procurement team to upskill them in key competencies such as negotiation and problem-solving, as well as the new processes and tools.

Efficio simultaneously worked with Elm’s procurement team to deliver the improvement opportunities identified, including multiple strategic sourcing initiatives as well as tactical ‘quick wins’ and contract renegotiations. The coaching and mentoring provided by Efficio consultants enabled Elm procurement staff to apply the new, best practice skills and processes in a real-world environment.

Results

The project delivered immediate and tangible benefits. The strategic sourcing workstream delivered cost reductions far in excess of initial targets, saving SAR46m (US$12m), or around 9% of addressable spend.

The new operating model also delivered improvements to procurement efficiency, including a 40% reduction in average sourcing lead times, freeing up time and resources to focus on value-adding strategic activities.

As well as these immediate gains, the project has transformed Elm’s procurement capability and created a platform for continued improvements in the future.

A new, dynamic procurement planning approach (developed as part of the project) has enabled Elm to build an increasingly accurate forward demand plan. The new, best-practice operating model remains in place and has been adopted and endorsed by the wider business – a testament to the success of Efficio’s focus on training and change management.

Most importantly, the Elm procurement team now has the skills, expertise, resources and tools to deliver real and sustainable value for the business.