The management of a large Danish wholesale company came up with a new strategy to ensure the efficiency in handling not only the large suppliers but also the small and medium sized suppliers. To achieve the new procurement strategy, Prokura introduced the concept of True Pocket Margin (TPM). This refers to the profit made on a product when all of the costs of marketing, purchasing, etc. are included.
The project consisted of four phases:
- Phase 1: a fact-based review of the company’s total purchase which identified negative TPM of some goods
- Phase 2: establishment of goals and strategies for subsequent negotiations with vendors that supplied products with a negative TPM.
- Phase 3: implementation of supplier negotiations by the client based on the strategies we developed
- Phase 4: implementation of the TPM concept within the company and ensuring employees’ ability to calculate the TPM for future products themselves
We implemented a far more detailed analytical tool which provided the company with the possibility of handling all of its suppliers based on a standardized approach in which both internal and external cost drivers were taken into account. Consequently, the project has resulted in significant savings.
To find out more about this case and other industry solutions wholesalers, please contact René Gram.