Improving Net Margin through leveraging on negotiating power

Our client, a big player in the retail industry with global operations, had been growing through acquisitions, thus adding new procurement centres to its structure. Although a major part of its revenue came from a few global suppliers, our client did not exploit its economies of scale and worldwide reach.

The project was set to centralize procurement efforts to leverage on purchasing power and increase sales, while implementing a new commercial model using standard processes to manage pricing, promotions and products, and changing the culture of the organization to become “category managers” rather than “buyers”.

In order to do so, we designed and implemented a global management model by category with increased specialization of the people, centralizing the responsibility for managing global suppliers worldwide – while leaving the responsibility around local suppliers in the country – and developing specific plans per supplier to drive sales growth. To ensure a smooth transition to the new responsibilities, we coached the teams in how to work effectively among themselves and other departments.

The key resulting benefits of the project were a clear and global managerial view of the key brands and suppliers, centralized and agile decision making and a growth in sales and margin driven by increased negotiation power, specific growth plans per brand and an increment in the newness of assortment and promotional pressure.