Global Multimedia Organization Transforms Sourcing and Procurement Function and Saves Millions

In many organizations, the procurement function is considered to be purely an administrative function and cost center, but addressing opportunities in this area offers businesses a chance to add significant value. Investment in and focus on the procurement function can enhance business outcomes, improve the bottom line, and help manage risk, especially during periods of rising inflation and supply chain bottlenecks.

This fast-growing global entertainment firm lacked a true procurement function and had no staff dedicated to managing spend within each business line. The company did not have insight into the goods and services it was procuring and what was included in the contracts for those goods and services. It also lacked a clear picture of how those contracts were being managed, whether they were favorable or not, and where its money was outflowing from the various parts of their business.

The organization engaged Protiviti to help establish a high-functioning procurement department that could provide operational efficiencies across strategic sourcing, contracting, and procurement while driving better visibility of spend and ultimately achieving cost savings across major spend categories.

Capturing quick wins and outgrowing limited procurement ability

The first task was to set up an efficient, transparent process for categorizing and analyzing current vendor spend. The company was spending far more than it should on contracted products and services, and it had multiple vendors supplying similar services across various departments. Contracts negotiated years prior were automatically annually renewed, even if the services were no longer needed or were irrelevant to current operations. With a lack of procurement expertise and little visibility across siloed departments, the organization was unable to leverage economies of scale and negotiating power to execute vendor contracts most cost-effectively.

Protiviti used a third-party spend analytics tool to consolidate and categorize vendor spend data, create dashboards, identify trends, and analyze individual line items within current third-party spend to uncover patterns and opportunities for vendor rationalization, better spend leverage, and more favorable pricing, all pointing to significant savings. Meetings were held with decision-makers within each business line to better understand the purpose of each contract and whether it had been reviewed recently to ensure its validity.

As part of this initial analysis, Protiviti worked with the organization to create a custom taxonomy for the procurement function – a necessary step, as finance and procurement view spend very differently. Finance typically sets up cost centers that are organized by business line or department. But to gain clear visibility into expenditures within various categories, spending needed to be organized in a category and sub-category basis to be able to look across departments.

After reviewing each spending category, the team conducted an opportunity assessment for the top vendors to determine which contracts were coming up for renewal in the next year and had not been bid competitively in the last three to five years. Identifying services that had not recently been competitively bid enabled the procurement function to build its project pipeline, and through achieving both cost savings and avoidance, the function has provided an average ROI of 290% since inception.

Building a sustainable procurement function

After achieving initial quick wins, the focus turned from spend and contract review and optimization to building a strong procurement function. Protiviti worked with key sponsors within the organization to design a roadmap for standing up a procurement department that would incorporate leading practices and ensure processes, procedures and skills would be ingrained in the organization for years to come. The company hired its first director of procurement and worked with Protiviti to develop purchasing standards and policies, along with job descriptions, to enable the function to staff up effectively.

As part of standing up the procurement department, an e-sourcing tool was identified and launched, allowing individual departments to collaborate with procurement on sourcing events. The software serves as a single source of truth for all procurement activities and allows staff involved in the sourcing process to provide feedback on RFP criteria, as well as report on savings and results of each project. To date, 150 company business partners across nine functional departments (including content creation, customer service, data science, facilities and real estate, human resources, legal, marketing, product, and tech) have collaborated on sourcing events using the tool. In all, the organization has completed more than 200 projects.

Value delivered: Spend transparency and efficiency in procurement operations

As a result of these efforts, the organization has recognized a significant, tangible return on its investment in creating a centralized procurement function. It successfully consolidated vendor lists throughout the enterprise, improved vendor management processes, and attained rich analysis and insights into its procurement practices. Despite the highest rates of inflation in four decades, the procurement function has successfully renegotiated with current vendors and solicited competitive bids to achieve significant savings. Over the past two years, the procurement function has achieved average cost savings of $7M and cost avoidance of $6.5M per year.

With Protiviti’s help, the company has designed, implemented, and staffed a high-performing procurement function. Key stakeholders from across the organization reach out to the procurement department to help with procurement activities, even when not required, based on enhancing company-wide visibility and transparency, empowering management to perform its duties of oversight and governance, ensuring proper adherence to all procurement policies and procedures, and driving the best costs for high-quality goods and services.

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