Procurement teams and budgets are shrinking. Procurement transformations drag on and on. Sourcing projects are delayed while another RFP update occurs. Companies turn to CoVest when facing these challenges for assistance in creating more procurement value.
As a group purchasing organization, CoVest utilizes the aggregate spending power of its members to create leveraged agreements with industry leading suppliers across a vast array of indirect categories.
CoVest focuses on combining the spend of members that are in and of themselves very large corporations. The reason for this focus is cost to serve – all of our members represent a similarly cost efficient customer to our suppliers due to their size. Combining these large, low cost-to-serve companies creates a program that is beyond what our members can reach alone where everyone benefits from the aggressive pricing that results.
CoVest, along with its members, focuses on categories where leverage can drive differentiated pricing and contract terms. Many indirect categories fit into this classification due to their low spend levels relative to the overall size of the business.
The benefits of leverage certainly start at driving a lower price, but reach far beyond. Our contracts are structured and managed differently. Our key items enjoy fixed, aggressive pricing, and the list is re-written regularly to ensure a tight fit with current spend patterns. Our blanket discount levels typically are driven to far more advantaged pricing levels than members can achieve individually. Our team spends far more time managing the specifics of each category than our members can afford as the spend levels in these categories are small for each member but very significant for CoVest. Lastly, our relationship with suppliers tends to reach higher in the organization and allow us to escalate issues more quickly on behalf of our members.
CoVest Category Development Process
Our category development process, whether beginning a new category or revisiting an existing category, comprises input from our members at every step of the way.
When developing a new category our members’ experience with a supplier is a key input into the sourcing process. And due to the number of members involved we typically have experience across the group with a large share of the major suppliers in the industry.
With the assistance of category subject matter experts from our strategic partner A.T. Kearney, our experienced sourcing professionals develop CoVest supplier agreements for our members. A rigorous seven-step strategic sourcing process is followed utilizing state-of-the art technologies and methodologies including expressive bidding, reverse auctions and best practice negotiations.
We understand that best price does not equate to optimal Total Cost of Ownership. We work with suppliers who are committed to driving down our members’ cost beyond the initial price savings, while developing a pricing and service model that’s tailored to the spend practices and needs of each of our members.
Our Category Management activities extend beyond strategic sourcing and category development to include ongoing cost reduction and supplier management. Together, these activities represent a key component of our value proposition.
We gather detailed member spend data regularly so that it is available for our category management activities and also for rapid distribution to members when needed.
We report category level savings quarterly to our members, and can create customized sales reporting if a member has unique needs.
We provide SKU rationalization feedback, develop alternatives programs and advice on supplier reduction opportunities.
We regularly engage manufacturers to negotiate deviated pricing that our distributors pass on as savings to our members
As a part of our commitment to ongoing cost reduction we annually re-write both group and member level core lists to ensure that they closely match member spend patterns and reflect the increasing leverage of CoVest.
We work with our suppliers to develop an implementation plan that meets your needs. Plan includes regular status calls, on-sight visits, timeline, email and marketing communication pieces and educational training seminars.
We conduct annual analyses to ensure our members have paid the correct negotiated prices.
Situation
A current member that had tackled some of the more straightforward categories in their path toward centralized procurement asked CoVest to assist in creation of centralized contracts for additional categories.
Approach
We worked with the member and our suppliers to drive a deep understanding of the business’s needs beyond simple price savings to ensure a strong fit from the inception of the contract. This was accomplished through the engagement of many internal stakeholders after we had gone through the benchmarking process and determined that sufficient savings was on the table to warrant the effort. Those categories included Bearings & Power Transmission, Electrical Supplies and Temporary Labor.
Impact
Each of the categories drove significant savings and compliance to the central contract increased dramatically as a part of the effort.
Company Description
Building Products Manufacturer
Category
Product Sub-Categories
Current Supply Situation
Central contract exists but with very low compliance
Procurement Strategy
Create centralized contracts and work with sites individually to sell the contract to drive compliance (all categories non-mandated)
Timeline of Engagement
The member desired to work a category at a time, each of which took 3-6 months to complete
Situation
Our member, a global chemical manufacturer, had previously approached their Office Supplies category at a country level and wanted to engage CoVest to build a global category approach. Total spend in the US and Europe exceeded $3 million annually.
Approach
Working with our member we gathered the detailed spend information at a country level and pricing for those items relative to our leveraged agreement with Staples. In the process we identified many opportunities for product alterations as well.
Impact
In this case the savings generated by switching to our agreement were immediate and sizable, driven by a much broader “entire spend” approach with a wide focus on all items purchased rather than a narrow core list that had previously been in place.
Company Description
Global Chemical Manufacturer
Category
Office Supplies
Product Sub-Categories
Current Supply Situation
Contracted, varies by country
Procurement Strategy
Category had been sole sourced but did suffer from some compliance issues with a newly acquired portion of the business.
Timeline of Engagement
This was the very definition of a quick win. From the beginning of CoVest’s involvement it was approximately 2 ½ months from the beginning of benchmarking analysis to the finalization of the category implementation.
Situation
A long time member asked CoVest to aid in reigning in their international and US office supplies spend under one supplier.
Approach
CoVest aided in the information gathering process and created a comprehensive database of international line item spend. We engaged our supplier partner, Staples, to benchmark the pricing, create core lists and identify savings.
Impact
This engagement created a sizable savings opportunity for our member, as has been common with many international program expansions.
Company Description
Global Manufacturer
Category
Office Supplies
Product Sub-Categories
Current Supply Situation
Procurement Strategy
Category had been sole sourced at a country level
Time of Engagement
The implementation took approximately 2 1/2 months, with around 2 months in the front end for benchmarking, core list development and contracting.
Situation
A new CoVest member asked that we aid in building their first company-wide category contracts after a long series of acquisitions.
Approach
Working with a large data set of all indirect transactions from the past year, CoVest parsed the data into sourceable buckets and identified which supplier was best positioned to supply those items. Working with multiple internal stakeholders to pull item descriptions and information, we benchmarked the items category by category and developed relationships with suppliers through site visits and local engagement.
Impact
The project generated over $2.5 million in year over year product cost savings for the member, in addition to paving the way for future product consolidation savings and providing a robust data set for future product pricing negotiations with manufacturers. As a part of the process the company reduced their indirect supplier count by hundreds of suppliers.
Company Description
Global Manufacturer
Category
MRO Focused
Product Sub-Categories
Current Supply Situation
Procurement Strategy
Developing a centralized, category management function where previously the individual facilities were left to purchase on their own
Timeline of Engagement
Within a year, we aided in moving the company in the transition from as many as hundreds of suppliers in a category toward a key supplier per category
“Fisher Scientific and CoVest Sourcing Network have enjoyed a long-term relationship and worked closely to service and support our joint customers. This agreement has helped Fisher Scientific gain new customers, strengthen relationships, and increase sales. This has been a win-win situation for both of our organizations.”
“The experience has been very positive working with CoVest. I feel as though this relationship is a partnership with a shared goal of providing the very best in services and representation for my customer. I feel as though we both have the same goal and really work toward making sure that the customer is wowed by what we can provide.”
