COGS Reduction & Margin Improvement

Working with a leading houseware goods company to improve margins and reduce costs.

To discuss how we can help you with similar challenges, please contact Jeremy Smith.

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The Problem

Following an eight-week diagnostic period, the 4C team was engaged to deliver ambitious cost reduction and margin improvement targets.
There was a lack of access to commercial data, which meant that buyers were not able to effectively prepare for supplier negotiations.
The client’s core sourcing capability was not identifying alternative suppliers, restricting competitive tension with long term suppliers.
Critical suppliers were not treated consistently and key category decisions were lacking customer and market insight.

The 4C team built a phased plan with each of the category leads focused on the balance of buying better, product portfolio mix and the trading strategy.
We reviewed all spend areas and applied the 4C Procurement toolkit levers to each sub-category to fully understand the potential scope for deployment.
Timelines and benefits phasing for each project were agreed, ensuring available time in the retail calendar and alignment to Right Customer Choice.
We applied the baseline and savings methodology for each project to show how benefits would be measured and tracked, typically using COGS reduction, margin rate improvement or cash margin growth.
In addition, we put governance in place to ensure that the client and the consultancy teams delivered to plan.

The project resulted in forecasted Programme Savings of £64m over three years, phased as £15m in the first year, £35m in the second year and £14m in the final year.
There was a significant improvement within the incumbent team who were challenged with new approaches to sourcing and new ways of preparing for negotiations.
We enabled sustainable change though a dashboard toolkit, which put data at the client team’s fingertips to ensure data-based decision making.