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4Thought
1. 4Thought Cutting to Grow
Predictions for 2013
4C’s resident experts consider
the challenges ahead
Cost Leadership
and Economic Uncertainty
How businesses are managing
to thrive in a challenging
environment
Effective Supplier
Relationship Management
Is SRM a waste of time?
3. Foreword
The challenging economic climate has seen a number of companies struggle
to achieve growth or even remain profitable. Despite this, some leading busi-
nesses have been able to flourish.
By making cost leadership a cornerstone of business strategy, organisations
have been able to drive growth through cost transformation. Recent examples
include BT, which cut operating costs by 10 per cent and consequently saw
pre-tax profits rise by 8 per cent, and Siemens, which estimates that integrat-
ing supply chain management activities into its business operations will save
€3bn by 2014.
At 4C we believe there is always a way for the very best companies to thrive,
regardless of the global financial situation. Over the past 12 months we have
worked with a number of clients from various sectors and, through strategic
cost transformation, have delivered cost reductions of 8 per cent on average.
This is a trend we are confident we can continue in 2013.
I hope you enjoy our predictions for the coming year, as well as our collection
of articles and write-ups, and do get in touch if you would like to discuss any
of the issues raised.
Ed Ainsworth
Managing Director, 4C Associates
Edward.Ainsworth@4cassociates.com
4Thought / 1
5. Predictions
2013 Predictions
4C’s resident experts consider the challenges ahead
H o t To p i c s
Deadline Day Buying — Lessons from the Premier League
Frugal Innovation in Healthcare
Insight
Cost Leadership and Economic Uncertainty
How businesses are managing to thrive in a challenging environment
Roundtable
Effective SRM: A Win- Win Situation?
The value behind working closely with suppliers
Case Study
Brakes
Brakes and 4C Associates work together to drive up margin through an indirect cost reduction programme
Review
Jugaad Innovation
A look at Navi Radjou, Jaideep Prabhu and Simone Ahuja’s guide to rediscovering innovation in the Western world
Events Listing
Our 2013 event listing
About Us
Who we are and what we do
4Thought / 3
6. Predictions
2013 Predictions
Prediction one: Cost Leaders Prediction two: Corporations Prediction three:
will continue to set the pace will align cutting costs and Online delivery models
carbon emissions to change drastically
With slow growth being forecast
throughout much of the western Businesses will again look for areas 2013 will be the year in which the
world, companies which adopt a where they can improve their envi- unsustainable “free home delivery”
cost leadership approach are those ronmental footprint whilst cutting model is dropped by many online
most likely to succeed. This strategy, costs. ‘Green’ initiatives, which had retailers. Faced with rising demand
which entails becoming the lowest previously moved down the agenda and fuel prices, retailers have found
cost producer in an industry, for a as companies focused on short term themselves making deliveries at a
certain quality of product, has been profits, will re-emerge as custom- loss. Research has shown that most
successfully adopted by a number of ers begin asking more questions customers are unwilling to cover
companies. Amazon, BT and Whit- about environmental compliance. In these costs, meaning retailers need
bread are all examples of industry the UK, new regulations announced to explore new delivery strategies.
cost leaders which have been able by the Deputy Prime Minister, will Examples include Amazon’s collec-
to thrive through innovative cost see all listed companies obliged to tion lockers and Tesco’s Click and
management. As the economy con- include emissions data in their an- Collect system.
tinues to stagnate, cost leaders will nual reports from April 2013. These
Craig Bunker
again show other companies how to measures will further intensify the
achieve growth in challenging times. spotlight on corporate carbon emis-
sions.
Ed Ainsworth
Robin Agarwal
Prediction four: Onshoring will become in- Prediction five: The rise of the corporate app
creasingly attractive
With IT departments grappling with security and man-
A rise in salaries in Asia, coupled with a global surge in agement issues arising from employees working from
fuel prices, will force companies which have moved func- personal devices, mobile computing is without a doubt
tions offshore to reconsider their options. In parallel to high on the list of priorities for 2013. A key trend will be
these developments, many western nations have begun redeveloping corporate IT applications to exploit the op-
implementing measures to make onshoring a higher value portunities offered by mobile devices. The dominance of
proposition. One example is the “Patent Box”, a tax reduc- Windows has already begun to fade and as IT functions
tion scheme which will come into force in the UK in 2013 enter a post-PC era they need to offer support for iOS and
and has already helped secure investment from GlaxoS- Android platforms. New markets will emerge, such as the
mithKline. The situation has already changed to the extent corporate app store and cloud service brokers. IT depart-
that Taiwanese iPhone manufacturer, Foxconn, is consider- ments will increasingly need to develop an enabling and
ing opening plants in the USA. coordination capability, in addition to the traditional com-
mand and control model.
Rob Lees
Ian Lund
4 / 4Thought
7. Prediction six: Cross-sector projects and col- Prediction seven: The Eurozone crisis
laborations will enable companies to access to continue
the next level of savings
The tail end of 2012 saw a number of small but positive
Despite the current economic climate there remain many signals emerge from the Eurozone economy. In Novem-
opportunities for businesses to innovate and work togeth- ber, for example, the rate of contraction in the Eurozone
er. 4C research has shown that companies are increasingly diminished, and the Purchasing Managers’ Index rose by
willing to discuss mutually beneficial collaborations. This 0.8 to 46.5, compared to the previous month. Despite this
approach is particularly relevant in terms of logistics. In limited progress, weak consumer demand, coupled with
this sector a joint strategy can deliver savings through a lack of confidence in business and a decline in global
shared vehicle utilisation, reduced labour costs, decreased trade, will see the Eurozone economy remain in decline
carbon emissions and technology deployment. Obtaining throughout much of 2013. Britain is likely to be the fastest
partner buy-in has often proved to be a stumbling block, growing of Europe’s largest economies and the European
however, as the financial situation remains challenging, Commission’s prediction of 0.9 per cent growth in 2013, is
2013 should see a rise in collaborative projects. in line with 4C’s estimates.
Tina Greer Rohit Moudgil
Prediction eight: Low inflation Prediction nine: Traditional Prediction ten: Barcelona
and higher prices shopping outlets will adapt for will win the UEFA Champions
a new breed of consumer League
In 2012, the UK experienced a period of
very low inflation. The Bank of England Faced with the phenomenal growth of Once again it is hard to look past Bar-
has stated that in 2013, it expects infla- online retail, traditional shopping outlets celona for the title of European cham-
tion to remain around 2 per cent, but will continue to lose market share. Studies pions. With a team boasting the likes of
estimated that there is a 30 per cent have found that British customers spent Lionel Messi, Andrés Iniesta and Cesc
probability of inflation rising above 3 per an average of £1,083 on internet shopping Fàbregas, the Catalan giants are, on
cent. The current economic situation in 2011. This represents an increase of 14 paper, the best side on the planet. Their
presents limited opportunities for com- per cent on the previous year. 4C predicts sometimes entertaining, sometimes
panies looking to grow with the market. that the number of consumers choosing nauseating, style of football has seen
Many businesses have been keeping their to buy online will rise by a similar number them pass their way through most of
prices low for a long period of time, but in 2013. This growth will be in part fuelled the world’s top defences. Despite this,
are now coming under increasing cost by customers shopping via mobile devices a defeat to Real Madrid in the Spanish
pressure. As a result of this, a number of and the adoption of new delivery chan- Super Cup and Chelsea’s surprise win
companies will be forced to raise prices. nels, such as Click and Collect. 2013 will in last year’s semi-final, is evidence
This will prove difficult for sellers, who see the beginning of shops being used as that they are beatable. Other possible
will need to tread carefully against strong depots and “show rooms” for consumers contenders include Spanish rivals, Real
resistance. Buyers will need to focus on looking to try before buying online. Retail- Madrid, German power house Bayern
implementing robust processes to miti- ers and distributors will need to drastically Munich, defensively frail Manchester
gate potential price increases. change their cost model. United and dark horse Juventus.
Jeremy Smith Helen Gallimore Michele Martinelli
4Thought / 5
8. Hot Topics
Deadline Day Buying —
Lessons from
the Premier League
By Jeremy Smith
As several Premier League foot- Maintaining a Strong
ball teams have recently con- Position
firmed, timing plays a key role There are several strategies which a
when it comes to determining buying party can employ to ensure
the balance of power between they do not find themselves in a weak
bargaining position. A key element
buyers and suppliers. Suppliers
is ensuring the business model is as
will be quick to take advantage
flexible as possible. An agile strategy
of any time related issues facing should take into account advanced
a buyer. However, by employing planning, which considers fairly
effective contingency planning predictable future cost changes, as
well as rolling forecasts and succes-
measures and ensuring alter-
sion planning, which allow a business
native supplies are available,
to react to changing market condi-
buyers can turn their time con- tions. Companies can also leverage
straints into an advantage. elements such as contract duration,
6 / 4Thought
9. brand, payment terms and IP to sup- compromising options. This includes Timing Negotiations
plement pure financial consideration. having alternative suppliers on hand
in case of incumbents stalling. This is Buyers who do not effectively plan for
One example is Luka Modric’s trans- the future find themselves with little
one of the reasons teams with large
fer from Tottenham Hotspur to Real option but to pay over the odds. Liver-
financial resources, wary of being
Madrid. The London club resisted pool are a case in point when in 2011,
exploited in a supplier dominated and
initial bids and was able to obtain regulated (Financial Fair Play) market, having received £50m in transfer fees,
a much higher price. On the down- are investing in youth development to spent £35m on deadline day for a
side, Tottenham found themselves provide alternative supply options. player now out on loan. Beginning ne-
in a situation with four days to sign
gotiations well in advance of deadline
a replacement and the very public Being aware of a supplier’s internal
workings will enable a buyer to take ad- day, having supply alternatives, pre-
knowledge that they had just banked
vantage of certain situations, including venting contract information leaking
a considerable fee. This information
monthly sales targets and production into the market, and long term plan-
was leveraged against them as they
uptime. Key to deliver this is control of ning, provides the buyer with several
looked for a replacement.
information. Those who have the upper options and real bargaining power. As
It is essential to carry out contin- hand in terms of knowledge will usually time runs out, so does a buyers ability
gency planning to avoid delays and get the better deal. to negotiate appropriate contracts.
4Thought / 7
10. Hot Topics
Frugal Innovation
in Healthcare
By Edward Ainsworth
Frugal or “Jugaad” innovation Companies such as General Electric
and Siemens, which produce some of
is a concept which is be-
the globe’s most expensive and com-
ing embraced by businesses plex pieces of medical equipment, are
across various sectors. One looking to develop simpler devices
which will drive growth in emerging
aspect of this movement,
markets and recession hit countries.
which is particularly relevant
Adapting to Demand
to the healthcare sector, is
producing low tech alterna- GE Healthcare is one of the com-
panies currently leading the way.
tives to more complex prod- The British based business, which is
ucts. owned by General Electric, has pio-
neered the use of mobile ultrasound
and electrocardiogram scanners in
less developed nations. Mindray, a
Chinese manufacturer of medical de-
8 / 4Thought
11. vices, has focused on reducing costs Delivering Cost Effective
and as a result can deliver scanners Performance
and portable electrocardiographs at
one tenth of the cost of their Western As it stands the healthcare sector is
counterparts. significantly behind other industries
in terms of cost effective innovation.
There are several reasons for this,
In the past these innovations would
including copious levels of red tape
rarely make it to Western markets,
and a lack of competitiveness driven
where insurance companies and the
by state and company funded health-
state shoulder costs. However, as
care. Despite this, times are changing
the economic environment becomes
and adopting a more frugal approach
increasingly difficult to navigate,
will allow the sector to drive growth
opening the doors to these less
in a challenging environment.
expensive products is becoming
a necessity. In the United States
alone, medical spending per head
has tripled since 1990.
4Thought / 9
12. Insight
Cost Leadership
and Economic Uncertainty
By Edward Ainsworth
What is Cost Leadership? in terms of share price. Figure 1 shows Whitbread, which owns popular
the top 10 FTSE 100 performers by brands such as Costa Coffee and Pre-
In his 1985 book, “Competitive
percentage of share price increase, mier Inn, has demonstrated that there
Advantage: Creating and Sustaining
during a time when the market showed is potential to do well during a reces-
Superior Performance”, Michael Porter
no growth. Eight of the 10 companies sion. By offering relatively inexpensive
identifies three generic business
incorporated cost leadership at the food and hotel prices, the group has
strategies. These approaches can be
heart of their strategy. managed to continue its expansion
applied to products or services across
and raise its share value by more than
all industries, and in companies of The top three all focused on cost as a
a quarter in the past year.
varying sizes. One of these, “Cost major driver for growth.
Leadership”, is a strategy based on Whitbread has effectively imple-
being the lowest cost producer in CRH, a leader in international build-
mented the right model at the right
an industry, for a certain quality of ing materials, combined a series of
time and taken advantage of the cur-
product. acquisitions with a ruthless cost re-
rent demand for less expensive hotel
duction programme. The second topic
A leading company will either sell and dining experiences. In order to
addressed in the company investor
products at average industry prices provide these services in a cost effec-
management statement, following
to earn more margin than its compet- tive manner, Whitbread has focused
notes on trading, is their ‘Cost Reduc-
itors or sell at below industry prices on improving procurement prac-
tion Programme.’ CRH delivered sav-
to gain more market share. A cost tices, menu management and labour
ings of €150m in 2012 as part of to-
effective business should also be able scheduling.
tal programme of €450m (on sales of
to weather any resulting price war
€15bn and EBIT of €1.5bn). Savings A key element of this strategy was
whilst remaining profitable.
came from three major categories: the launch of several ‘Skill Acade-
structural changes (including admin- mies’, which provide training for man-
Businesses Doing it Right
istration and production efficiencies), agers and team members in improv-
Our research has shown that many of process changes (including increased ing operational and cost efficiencies.
the companies which implemented a usage of alternative fuels, operational Another example of Whitbread’s cost
cost leadership strategy in 2012, were throughput and yield improvements) leadership approach is the company’s
also amongst the highest performers and procurement benefits. use of e-auctions to minimise the
10 / 4Thought
13. Source 4C Associates, Hargreaves Lansdown
impact of rising commodity prices. cost control and a broad product return on investment. Net operat-
The process allowed Whitbread to range. Profit before tax rose 21 per ing expenses increased 6 per cent
avoid paying a 16 per cent price hike cent to 152.8m pounds, in the year as its efforts to cut rising staff and
for a key commodity - potatoes. This ended June 2012, on a 15 per cent administrative costs largely offset the
approach saved the company an esti- increase in revenue. Cost control impact of a 30 per cent increase in its
mated £400,000 per year. was a key contributor to this perfor- contributions to an industry compen-
mance. Initiatives undertaken include
sation scheme.
Hargreaves Lansdown, an online deploying a range of more efficient
financial services provider, beat full- processes, such as moving much of These examples illustrate the mul-
year profit forecasts through tight their marketing online for a higher tiple benefits which companies gain
4Thought / 11
14. from becoming cost leaders. Not only requesting a 4.7 per cent price de- fuel efficient planes than many of its
do profits increase but so too does crease and harmonisation of payment rivals, Ryanair was able to charge
share price value. Given the speed terms towards the 75 days standard lower fares and fill planes with pas-
that costs can be transformed, our (excluding small businesses). sengers, who might not spend a huge
analysis has demonstrated that this amount on tickets but spend profit-
is the fastest way to grow share able sums on food and hotel reserva-
Driving Innovation
price. tions.
One of the key elements behind a
Ryanair has introduced a number of
Successful Cost Leadership successful cost leadership strategy is
measures which helped the busi-
Initiatives fostering a mentality which encour-
ness to a profit of €503m in the past
ages innovation. The best way to
4C Associates is currently driving a financial year. These include, being
reduce expenditure is to look at cost
variety of innovative cost transfor- the first airline to implement baggage
from a different angle. An example of
mation projects for several clients. charges, working to eliminate the
this is a driving school which employs
The most recent is Project Flow, a need for check in desks and cutting
one brand of car. By supplying cars
Network Optimisation initiative being the weight of its aircraft. Most re-
to the motoring school, the vehicle
carried out to reduce empty miles cently the company announced it was
manufacturer is effectively adver-
and increase efficiency within the examining the possibility of larger
tising its products to every learner
clients’ supply chain. CAST modelling aircraft doors, to speed up boarding.
driver using the school. In this situa-
tool was used to gather all relevant In a similar vein, rival airline Easyjet,
tion which party should be compen-
data on ingoing and outgoing trans- is to introduce allocated seating in an
sating the other?
port flows from client factories and attempt to secure revenue from hav-
distribution centres. Geo-mapping The airline industry has long been ing passengers pay to choose their
techniques were then used to match striking profitable deals with airports seats. This consistent search for new
outbound customer deliveries with to keep certain routes open. Ryanair ways to transform costs, is the es-
inbound raw material deliveries in or- in particular has championed the sence of the cost leadership strategy.
der to leverage the benefits of round notion of looking at costs in an in-
trip pricing. Initial savings of 18 per novative manner. The Irish airline’s Seeking out Opportunity
cent were achieved on transportation business strategy was pioneered by
Despite the lack of optimism sur-
costs. Southwest Airlines and made up of
rounding the current financial cli-
four guiding principles: employ a
Another 4C project, “Bondi”, is a mate, several of the world’s leading
single type of plane to keep costs
broad brush cost reduction and cash businesses have been able to thrive.
down, constantly review overheads,
release exercise across all categories, The difficult environment, in which
turn aircraft around as quickly
all geographies and all suppliers with many companies are evolving, repre-
as possible and abandon point
spend over £100k. Suppliers were sents a great opportunity to review,
schemes.
further segmented by their effective improve and revolutionise established
impact to business in case of non- In 2002, Ryanair secured a significant industry practices. By adopting a new
supply. Different negotiation strate- discount on the purchase of 100 Boe- way of approaching cost, businesses
gies were then adopted for each dif- ing 737-800 jets with the option to can leverage innovative cost leader-
ferent segment. The project entailed buy a further 50. With newer, more ship practices to drive growth.
12 / 4Thought
15. Figure 2. Understanding how your costs compare
Source 4C Associates
Many companies are unsure of Figure 2 demonstrates the cost The reality of the current economic
whether or not they are a cost per case delivered for a range of climate is that growth through
leader within their industry. In this national and regional FMCG prod- sales will continue to be difficult to
situation the golden rule is: if you do uct distributors. Knowing where achieve. For most companies adopt-
not know that you are a cost leader, your business stands enables you ing a cost leadership approach and
you almost certainly are not. Figure to set targets for what you have implementing cost transformation
2 is an example of a benchmark- to achieve, and forces you to think techniques, represents the most ef-
ing initiative which we carried out ‘what do I need to do to be the fective strategy to gain market share
for one of our clients. This graph leader.’ This analysis also includes and sustain profitability.
highlights the importance of moni- two fuel price scenarios, which help
toring competitors and implementing understand how changing prices
industry best practice. impact different companies.
4Thought / 13
16. Roundtable
Effective SRM:
A Win-Win Situation?
With procurement functions “I don’t separate SRM from my between good contract management
buyer, I don’t understand why and effective SRM.
under increasing pressure
you would.”
to deliver quick win savings, SRM vs. Contract
Procurement, it was argued, is per-
long term projects such as Management
fectly placed to carry out SRM. There
Supplier Relationship Man- is no reason the function should del- “Have there been any revolu-
agement (SRM) are often egate what is already an important tionary changes in the field since
element of its job description. In fact, Toyota, almost 10 years ago?”
put to one side. In addition, as the days of “beating up suppli-
It was argued that contrary to con-
there is a divide in opinion ers” come to an end, SRM is likely to
tract management, SRM provides an
become an increasingly integral part
regarding the involvement of invaluable opportunity to engage with
of the procurement function.
buyers in SRM; in some busi- stakeholders. One attendee explained
This claim was debated, and it was how a thorough understanding of his
ness the functions are kept
suggested that due to the recession, supplier’s processes resulted in sev-
separate whereas in others it is possible to demand that suppliers eral manufacturing procedures being
SRM is part and parcel of the lower their prices by 5 - 10 per cent. amended. These included increasing
This statement was tempered by the the size of batches for dispatch and
procurement process. adding barcodes to certain products.
admission that regardless of the eco-
nomic climate, procurement still has Each change rendered operations
4C Associates brought together sev-
a lot to learn in terms of SRM. Sales more efficient and reduced costs.
eral leading procurement profession-
was put forward as one department SRM also facilitates the exchange of
als to discuss the potential benefits of
leading the way in terms of building best practice solutions.
SRM. An animated discussion fol-
relationships. Several attendees called
lowed in which attendees discussed “At the end of the day there has
for more SRM training to be given to
how to define SRM, how much value to be a return on investment for
procurement professionals.
the process can bring to a company managing suppliers.”
and what represents current best “Until procurement understands
Rob Lees, Managing Partner at 4C
practice. the value of asking someone
Associates, explained how during his
about their holidays, SRM in
time at Vodafone, his team employed
Defining SRM most companies will enjoy lim-
a number of systems to drive stake-
ited success.”
A number of attendees expressed holder involvement. A key compo-
contrasting viewpoints as to what Another attendee added that in his nent of this strategy was presenting
constitutes supplier relationship business, procurement is charged awards to suppliers who consistently
management. One opinion was that with running the SRM process. In his performed to expectations. These
whereas procurement was purely opinion the practice delivered incre- ceremonies not only served to drive
interested in contract management mental benefits to the business but spend towards top providers but also
and numbers, SRM deals with rela- no step changes. He did not view this allowed suppliers to spend time with
tionships with people. This claim was situation as exceptional and asked if senior management. As a result, ad-
debated by several participants. anyone could draw a clear distinction ditional resources were attributed to
14 / 4Thought
17. the account and procurement’s profile Giving procurement a responsibility “In business we are used to be-
was raised within the business. beyond the negotiating process for a ing cold - we need to start get-
specific cost, represents an attractive ting warmer and are currently
proposition for the function. This will looking to hire consultants with
Why Invest in SRM?
not only ensure increased value from people skills.”
One of the principal difficulties in contracts but also demonstrate the
Until SRM becomes a two-way de-
getting approval for an SRM pro- importance of procurement beyond
bate with suppliers as opposed to
gramme is the seemingly intangible simple savings.
a one-way discussion, there will be
nature of the benefits it delivers. It
“One of my clients has someone opposing views on how to best carry
is procurement’s responsibility to
whose sole function is to man- out the process. Procurement needs
demonstrate the numerous benefits
age a single supplier. He keeps to become more accommodating
which a well-run SRM programme
costs low and ensures the rela- towards the needs of suppliers and
can produce. These include not only
tionship continues to evolve for recognise that there is value in mak-
raising procurement’s profile and
the benefit of both parties.” ing concessions.
consequently fostering compliance,
but also mitigating risk through more As suppliers continue to struggle, ef-
Event Information
effective supplier management. fective SRM will become increasingly
important for businesses looking to On the evening of the 4th Octo-
“We are trying to use SRM to
do well in a difficult economic envi- ber 2012, 4C assembled a group of
punch above our own weight. A
ronment. A well-run, collaborative procurement leaders from different
lot of our suppliers are actually
process can ensure value for both industries at the St Pancras Renais-
bigger than us.”
parties, through lower costs, mitigat- sance, Kings Cross. The event was
The majority of those present were of ed risks, increased efficiency, innova- chaired by Ed Ainsworth, 4C’s Manag-
the opinion that SRM was an impor- tive methods, increased quality and ing Director.
tant element of modern procurement. faster time to market.
Attendees included Ian Claydon-
If effectively carried out the process
Butler, Global Head of Procurement
not only allows the function to “up
Collaboration not Coercion at Mercury Pharma, Neil Gilbertson,
its game” within the organisation but
Strategic Sourcing Business Partner at
also to shift its reputation from spend One of the key points to emerge
Royal & Sun Alliance Insurance PLC,
restriction to spend management. Sev- from the discussion was that there
Dave Magrath, Head of Procurement
eral participants also agreed that keep- are many different views surrounding
& Major Subcontracts at Sellafield
ing SRM separate from the procure- what constitutes SRM. Some feel the
Ltd, Stephen Pearce, Global Head of
ment function could be a real issue. process is already an integral part of
Procurement at Arysta LifeScience,
the procurement function whereas
“[SRM] frames everything pro- Nicki Perrott Head of Procurement at
others believe it remains a separate
curement does and is pivotal to J Sainsbury PLC, Keith Taylor, Head Of
entity. The general consensus, how-
stakeholder engagements.” Procurement at Odigeo, Nick Wilkin-
ever, is that regardless of who cur-
son, Purchasing Director.
There was a general consensus that rently carries out SRM, it will become
most buyers would want to be in an increasingly important element of
charge of both sourcing and SRM. the procurement job description.
4Thought / 15
18. Case Study
Having successfully managed
costs in Direct Spend,
Brakes examine
their Indirect Spend
Ian Goldsmith, Group Chief Operating Brakes
Officer, Brakes Group
Brakes Group is a leading European
“4C proved an invaluable supplier to the catering industry,
with presence in the UK, Ireland,
resource for us and delivered France and Sweden. Brakes oper-
high quality category plan- ate from 80 locations, harnessing a
ning, analysis and project team of over 10,000 employees. The
company supplies more than 10,000
management skills to the product lines of frozen and chilled
Brakes Team. 4C led from grocery products, non-food and
the front, were enthusiastic catering equipment to the educa-
tion, healthcare and travel sectors,
and energetic and played as well as numerous restaurants and
a key role in shedding light pubs. Annual turnover is in excess of
£2.4Bn.
on an important part of our
business. I would not hesi- Business Challenge
tate to recommend 4C.”
Having successfully collaborated on
a project in the Direct Spend area,
Brakes decided to continue working
with 4C Associates on an initiative
aimed at cutting costs in the Indirect
Spend (Goods Not for Resale - GNFR)
area.
Historically, GNFR had not received
the same focus as Direct Spend.
It had been under-resourced and
16 / 4Thought
19. sourced tactically, with relatively 4C singled out key suppliers, con- Life Cycle models created to
limited Procurement involvement. tracts and categories for negotia- underpin the management of
The COO’s challenge was to deliver tion, as well as areas where value Commercial Vehicles and Forklift
substantial cost savings, under- could be added and risks eliminated. Trucks.
pinned by a cost effective sourcing The findings were presented to the
process. Brakes Board and 4C were asked
to go ahead and to implement and
Key categories included: Commercial
deliver the identified savings. A fee
Vehicles, Forklift Trucks, Third Party
structure, predominantly based on
Storage & Distribution, Fuel, HR Re-
hitting performance milestones and
cruitment & Systems, Waste, Couri-
the delivery of savings, was agreed.
ers, Telecoms and Company Cars.
Results
Approach Key results achieved were:
4C’s first priority was to carry out Strong senior stakeholder engage-
an opportunity diagnostic across ment across all categories, man-
the Europe Business Units in order aged via highly credible category
to determine where savings could experts
be delivered. This entailed collect-
ing data from numerous internal Significant annual savings deliv-
stakeholders as well as Brakes’ ered across all categories
suppliers, in order to present a
Payment Terms extended with a
clear picture of the current situa-
high percentage of suppliers to
tion. Once all relevant information
improve working capital
was collated, 4C carried out an
in-depth analysis of each category. The introduction and embedding
This was undertaken using 4C’s of a robust and sustainable sourc-
cutting edge tools. ing process
4Thought / 17
20. Review
A look at Navi Radjou, Jaideep Prabhu
and Simone Ahuja’s guide to rediscovering
innovation in the Western world
that Western companies must turn to Keep it Simple
developing markets for inspiration. Include the Margin
Follow your Heart
3M is given as an example of a
Western company effectively imple- Each section contains numerous case
menting Jugaad techniques. This studies which examine how busi-
multinational corporation, based nesses have successfully applied
in Minnesota, has been releas- the principles of Jugaad Innovation.
ing iconic products since it was Examples range from the inven-
founded in 1902. Decades ago, tion of the combine harvester to the
when 3M realised that consumer more recent release of Aakash, the
products rapidly became obsolete, $60 tablet computer. The current
the company implemented a 30 per “Jugaad” practices of certain West-
cent strategy. ern companies, including Facebook,
Renault and BestBuy, are also dis-
This policy states that 30 per cent of
sected.
revenues must come from new prod-
ucts introduced no more than five Jugaad Innovation provides invalu-
years ago. Known as the New Product able insight into the prevalent form
Vitality Index, the policy was further of innovation in emerging markets.
Jugaad is a Hindi word which complemented by a 15 per cent pro- It demonstrates how businesses can
gramme. Upon realising that employ- thrive despite the difficult economic
refers to an improvised solu- ees were at their most creative in landscape. The authors also highlight
tion born from ingenuity and their “spare time”, 3M allowed staff to how a shift from more frugal prac-
allocate 15 per cent of their time to a tices, such as those employed during
resourcefulness. This concept
“dream” project. the Industrial Revolution in the US,
forms the basis of “Jugaad to rigid process, including Six Sigma,
This revolutionary strategy, which has
Innovation”, a book which ar- since been emulated by Google and
have stalled innovative thinking.
gues that companies need to other successful companies, allowed In the words of Kevin Roberts, CEO
embrace a frugal and flexible 3M to quickly respond to an ever worldwide, Saatchi & Saatchi, “I′ve
evolving market. The business cur- long argued that the role of business
mind-set in order to better rently boasts a portfolio of more than is to make the world a better place.
foster innovation. 75, 000 products, including Scotch In the new economy, this requires
Tape and Post-it Notes. true innovation-bold ideas, gutsy
Authors, Navi Radjou, Jaideep Prabhu people, and extraordinary actions.
Jugaad Innovation is broken down
and Simone Ahuja, argue that the cur- Need a new roadmap? Fresh inspira-
into six guiding principles:
rent method of nurturing innovation tion? Accessible tools? It′s all in this
has become obsolete. Simply increas- Seek Opportunity in Adversity remarkable book, Jugaad Innovation.
ing capital and resources will not guar- Do More with Less Get a copy for yourself and every
antee new ideas and the authors argue Think and Act Flexibly member of your team today.”
18 / 4Thought
21. Events We run a number of thought leadership
events throughout the year for friends
and clients. If you are interested in
attending, please get in touch.
2013 Contact details:
Petra.Urhofer@4Cassociates.com,
tel.: +44 (0)20 7605 1600,
fax: +44 (0)845 051 8776
Roundtable Discussion
Breakfast Debate
13th Feb Effective performance is not dependent on qualifications London
13th Mar Managing risk and driving growth London
Effective supplier management can provide step change
20th Mar impact to a business
London
The changing balance between risk and reward will see
15th May a rise in onshoring over offshoring
London
Lean thinking can transform supply chains, it is not only
12th Jun for manufacturers
London
26th Jun Cost leadership through innovation London
What is the best commodity buying strategy: roll with
10th Jul the market, hedge or integrate
London
The only worthwhile measure of marketing performance
11th Sep is seeing growth in the revenue line
London
There is no justification for keeping the IT function in-
9th Oct house
London
16th Oct Collaboration – creating value, not theory London
13th Nov Finance do not value procurement savings London
4Thought / 19
22. About
4C Associates
4C Associates has the insight, technology and experience to drive rapid
profit improvement.
We offer specialist consulting, technology and managed services to trans-
form your costs. We apply industry and functional expertise to deliver
exceptional benefits.
Our team works with leading organisations to understand, optimise and
reduce costs in all major spend areas, including Direct Materials, Services,
Supply Chain and Logistics, Marketing, IT, MRO, HR, Property and FM. We
apply deep practical knowledge, combined with process, change skills and
the latest software, to deliver reduced costs and increased profits.
Creativity and innovation runs through all of our work. Our agility and flex-
ibility is reflected in the commercial models we operate with our clients,
ranging from flat fee to full gainshare. We can guarantee your return on
investment.
You can reach us at:
4C Associates Ltd, The Kensington Centre, 66 Hammersmith Road,
London, W14 8UD
Email: innovate@4cassociates.com
Tel: +44 (0)20 7605 1600
Fax: +44 (0)845 051 8776
20 / 4Thought
