procurement case study exercise

This site uses cookies to improve your experience. By viewing our content, you are accepting the use of cookies. To help us insure we adhere to various privacy regulations, please select your country/region of residence. If you do not select a country we will assume you are from the United States. View our privacy policy and terms of use.

• Inventory Management Software
• Forecasting
• Sustainability
• Supply Chain Visibility

S&OP in Agribusiness: How to Harvest the Benefits with Advanced Analytics

JULY 23, 2019

But supporting the process with advanced analytics goes even further, contributing to higher levels of productivity and profitability. Like many organizations, Tereos recognizes the use of advanced analytics as an imperative. Advanced analytics as enabling technology. The use of predictive analytics is fairly common nowadays.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Trending Sources

Supply Chain Shaman

Talking Logistics

• Logistics Viewpoints
• The Network Effect
• The Logistics of Logistics
• Enchange Supply Chain Consultancy
• Enterra Insights

6 Essential Procurement Training Courses for Professionals: How To Begin and Advance Your Career in Procurement

JULY 3, 2023

In today’s fast-paced and competitive business landscape, organizations across industries are realizing the immense value of effective procurement practices. Procurement professionals play a vital role in driving operational efficiency, cost savings, and strategic decision-making. But how do you get started? Do not worry!

No Easter Bunny?

FEBRUARY 25, 2016

Dear Supply Chain Leader, Today, sitting in my seat in 11K on a Cathay Pacific flight between Hong Kong and Boston, I want to report that there is no Easter Bunny. Today I also want to report that, based on over a decade of scientific discovery, traditional supply chain practices are not best practices. There is also no Santa Claus.

How the Dutch Armed Forces’ Change Management Approach Contributed to 3D Printing Adoption

DECEMBER 3, 2020

In other words, because some parts have a long lead time or may be difficult to purchase , companies tend to build up excess inventory. Discussing these data points and extracting insights becomes a helpful exercise and results in a transversal approach. This often leads to 60-80% non-moving stock.

Cost to Serve Analysis—And the Costs of Neglecting It

Logistics Bureau

SEPTEMBER 4, 2023

When costs begin to spiral out of control, the result is usually a loss of revenue in proportion to sales. Potential Factors in Declining Margins To get to the root of the problem, understanding the costs of production or purchasing will be a necessary starting point, but typically, more information will be needed.

Google Will Acquire a 3PL – And Other Supply Chain and Logistics Predictions for 2015

DECEMBER 11, 2014

We never expected or predicted that the clunky analog cell phones we carried on our belt clips back then would quickly evolve into Internet-connected smartphones with digital cameras built-in, which is today cannibalizing digital camera sales ! Big Data and Analytics for Oil and Gas Transportation. Robinson Acquires Freightquote.

8 Reasons Why Your Business’ Success Depends Upon Your Supply Chain

JANUARY 7, 2020

Conversely, just 8% of businesses with less capable supply chains report above-average growth. 2) According to a 2012 report into corporate insolvencies by the Australian Securities and Investments Commission, 44% of businesses in Australia failed because of poor strategic management. Mini Case Study : Walmart.

Supply Chain and Logistics Predictions for 2016

DECEMBER 16, 2015

And more companies are treating Supply Chain Design as a continuous business process instead of a standalone project or a once-a-year exercise (see Supply Chain Design: Growing Scope, Community, and Collaboration ). Making supply chain and logistics predictions is like throwing darts at a moving target. What will happen in 2016?

Supply Chain Management:Importance of Proactive Master Data.

Infosys Supply Chain Management

JULY 26, 2013

Sourcing & Procurement . Sourcing & Procurement . ProcureEdge – Sourcing & Procurement . Case Studies . |. For instance, if Product-Location has procurement type In-House Production ("E") and if it is missing a corresponding PPDS PPM, then we flagged it as an error code. Customer Service.

Logistics KPIs Case Study: Whirlpool’s Supply Chain and Logistics Success Driven by Effective KPI Implementation

GlobalTranz

OCTOBER 29, 2015

We conclude our ongoing series in talking about effective KPI management by giving you a real live Logistics KPIs management case study from Whirlpool's engagement with a logistics service level provider. We hope the following case study shows you the proverbial proof in the pudding of effective Logistics KPIs management. .

Your Procure-to-Pay Suite Won’t Cut It For Supplier Management – Here’s Why

HICX Solutions

MARCH 17, 2020

The continued growth in the adoption of procurement -to-pay (P2P) or source-to-settle (S2S) suites in the last few years is testament to the significant value they deliver to procurement teams in businesses of all sizes. It’s not a mistake that many procurement leaders make twice. And this is where the problems begin.

Case One Stop: Automated Planograms For Localized Demand Give Double Digit Sales Lift

RELEX Solutions

MAY 5, 2017

Case One Stop: Automated planograms for localized demand give double digit sales lift. Insights » Case Studies . Using the project as a consultancy exercise gave us targeted space planning recommendations for every category within the innovation stores.”. Introduction. One Stop is a leading UK convenience retailer.

Navigating Your Migration to a Cloud-Based ERP Solution: Comprehensive Guide & Checklist

JANUARY 18, 2024

As much as 70% of enterprise companies are migrating to an ERP system in the cloud , according to a report by Cloud Security Alliance. Real-time insights and analytics enable faster and better-informed decision-making. All processes are standardized and streamlined to deliver maximum efficiency.

Stay Connected

Join 136,000+ Insiders by signing up for our newsletter

• Participate in Supply Chain Brief
• How to achieve six-figure benefits from digitizing paper-based supply chain operation
• 2019 Supply Chain Brief Summer Reading List
• Stay At Home Reading List
• Add a Source
• Add a Resource
• 2018 Supply Chain Brief MVP Awards
• 2019 Supply Chain Brief MVP Awards
• 2020 Supply Chain Brief MVP Awards
• 2021 Supply Chain Brief MVP Awards
• 2022 Supply Chain Brief MVP Awards
• Thu. May 23
• Wed. May 22
• Tue. May 21
• Mon. May 20
• May 11 - May 17
• Warehousing
• Procurement
• Transportation
• Supply Chain
• More Topics 

Input your email to sign up, or if you already have an account, log in here!

Enter your email address to reset your password. a temporary password will be e‑mailed to you., be in the know on.

Supply Chain Brief

Expert insights. Personalized for you.

We organize all of the trending information in your field so you don't have to. Join 136,000+ users and stay up to date on the latest articles your peers are reading.

Get the good stuff

Subscribe to the following Supply Chain Brief newsletters:

You must accept the Privacy Policy and Terms & Conditions to proceed.

You know about us, now we want to get to know you!

Check your mail, we've sent an email to . please verify that you have received the email..

We have resent the email to

Let's personalize your content

Use social media to find articles.

We can use your profile and the content you share to understand your interests and provide content that is just for you.

Turn this off at any time. Your social media activity always remains private.

Let's get even more personalized

Choose topics that interest you., so, what do you do.

Are you sure you want to cancel your subscriptions?

Cancel my subscriptions

Don't cancel my subscriptions

Changing Country?

Accept terms & conditions.

It looks like you are changing your country/region of residence. In order to receive our emails, you must expressly agree. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails.

You appear to have previously removed your acceptance of the Terms & Conditions.

We noticed that you changed your country/region of residence; congratulations! In order to make this change, you must accept the Aggregage Terms and Conditions and Privacy Policy. Once you've accepted, then you will be able to choose which emails to receive from each site .

You must choose one option

Please choose which emails to receive from each site .

• Update All Sites
• Update Each Site

Please verify your previous choices for all sites

Sites have been updated - click Submit All Changes below to save your changes.

We recognize your account from another site in our network , please click 'Send Email' below to continue with verifying your account and setting a password.

You must accept the Privacy Policy and Terms & Conditions to proceed.

This is not me

KPMG Personalization

• Home ›
• Insights ›

Case Study: Transform a Procurement Organization

Investco’s purchasing demands were growing faster than their procurement capabilities could handle—the process was at a breaking point.

Despite a time of economic instability with headlines depicting a grim global economy plagued with debt crises, financial volatility, and lower commodity prices, Investco has continued to sustain its competitive advantage in hedge fund management. Similar investment companies recorded portfolio losses, while Investco experienced unprecedented growth, expanding its client roster, maintaining and improving historical returns, and substantially increasing the number of its personnel during this period.

Although Investco retained a competitive advantage, the company was growing organically faster than internal processes could adapt to scale and new demands. This growth challenge was exacerbated by the current procurement practices which varied by business unit with limited enterprise-wide standards or policy. Lengthy cycle times and redundant activities were common across the procurement to pay cycle as a result of this rapid growth and nonstandardized approach. Adding to the challenge, the existing procurement tool, a custom-developed solution, was inflexible and inefficient. While the tool was fixed and rigid, individual business unit processes and approaches were not. Some business units used purchase orders, where others did not. Each business unit had a variety of process and review steps for purchasing goods and services. The legal review process for contracts was not differentiated or scalable based on type of purchase, and the review steps were not consistently applied. Spend authorization thresholds were low relative to the large number of purchases at a smaller dollar value and had not been adjusted to reflect growth. For example, a $50 software license renewal went through the same review stages (technology, legal, and sourcing) as a one-off $100,000 specific piece of IT equipment. Investco’s existing tool did not have workflow capabilities that would meet the new needs of the business, and concerns existed regarding scalability. The inflexible workflow issues combined with poorly designed process also led to late engagement of the required reviewers. For example, a purchase would frequently go through sourcing or contract review before technology review.

The impact of these inefficient processes was being felt as a constraint to leveraging third party goods and services to support firm growth. When the firm identified a need for a new procurement software tool to address these constraints, KPMG was chosen to assist Investco with the selection of the tool and the initial design of the new procurement solution.

© 2024 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit https://kpmg.com/governance .

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities. Any trademarks or service marks herein are the property of their respective owners.

Connect with us

• Find office locations kpmg.findOfficeLocations
• Email us kpmg.emailUs
• Social media @ KPMG kpmg.socialMedia
• Request for proposal

ChatGPT & AI in Procurement Course Free Preview Lesson

Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Procurement Case Studies — 10 Insightful Examples

Table of content

• Amazing vs Wholefoods
• Vaccinate Nationalism
• Golden Donut Chain
• East China Sea
• Apple vs Samsung
• RJR Nabisco Tabacco
• Microsoft vs Nokia
• International Longshore and Warehouse Union
• North Korea vs South Korea
• Largest Ponzi Scheme

Frequently asked questions

Key takeaways

• Whether in international relations, business disputes, or organizational conflicts, parties must invest time in building trust.
• Cultural differences can significantly impact the negotiation process. Understanding the cultural nuances of the parties involved is crucial.
• Even individuals with strong ethical values can inadvertently engage in deceptive practices driven by the desire for high profits or personal gain.

Negotiation occurs naturally when parties are dealing with one another to form an agreement. It is the first step in developing or creating an agreement that both parties will mutually benefit from. However, not all negotiations end up in a good way. Sometimes, a dispute is created when both parties are invested in the negotiation. 

For this article, we will check ten negotiation and procurement case studies that can give you insight into how to negotiate with the other party. We will explore how they tackled the situations in which parties are in dispute. 

After reading this article, you will have an insight into how to negotiate with someone through these negotiation examples . You will learn how to tackle disputes in a negotiation without harming the other party’s reputation. So without further ado, let us start delving into these ten insightful cases.  

I have created a free-to-download editable procurement strategy template. It’s a PowerPoint file you can use to create your own strategy after being inspired by the case studies below. I even included a video where I’ll explain how you can use this template.

Example 1 — Price negotiation between Amazon and Whole Foods

Actual case:

The case study is based on a real-life price negotiation between Amazon.com and Whole Foods Market. 

Whole Foods Market has been declining in performance in the market for the last two years. Due to this, the activist hedge fund that owns almost 9% of the common stock is pressuring the former. 

The activist hedge fund is eyeing the reform of the management style of the executive officers as it asserted that they are the ones responsible for the poor results achieved by the Whole Foods Market. In other words, the CEO of the Whole Foods Market is in trouble of losing his position

In light of the pressure that comes from the activist hedge fund, four different equity firms send separate inquiries to Whole Foods Market. One of the equity firms offered a share cash price of $36.00. This is in line with the historical share price of Whole Foods Market. Private investment in public equity (PIPE) is the shortcut for companies that are in need. 

However, pursuing this will put Whole Foods Market at numerous disadvantages. The result of the buy-out might make shareholders quickly sell their stocks. If a large number of stocks are sold at a lower price, the private equity firm may pressure the company. Additionally, it may claim ownership of the company. 

A few days ago, Amazon’s CEO reached out to Whole Foods Market. It was expected as many news outlets reported that Amazon is interested in acquiring the latter for opportunities in the retail sector. 

The reason why the Whole Foods Market is a good candidate for Amazon to acquire is its attractive value and strategic deal. Amazon expects that it can guarantee a substantial premium. The first signal of commitment by Amazon is the face-to-face meeting with the Whole Foods Market’s CEO. Moreover, Amazon just launched a new service called AmazonFresh that fits perfectly with what Whole Foods Market has developed which is the local-based fresh-goods delivery system. 

Before the prospect of acquiring Whole Foods Market, Amazon has another candidate which is Silvia’s Market. The strategy of this company is focused to become the best supermarket that a middle-class family can trust. However, looking at the collaborative opportunity of the two parties, you will start to have some doubts. This is because Silvia’s Market’s mission is too far away from the core value of Amazon which is Innovation. 

That is why the most attractive option is to choose Whole Foods Market rather than Sylvia’s Market because the synergies between Amazon and Whole Foods Market are the best option. 

One core aspect of Amazon is high-velocity decision-making. However, this strategy does not line up with Whole Foods Market. That is why Whole Foods Market suggested the decisional strategy of disagreeing and committing. 

Most negotiators face challenges within themselves thinking about what to offer, what is the reasonable agreement to accept, and the real interest in the negotiation. For this, you would need high-velocity decision-making because time is important in negotiations and the time you will need to decide is crucial.

Whole Foods Market needs to know that Amazon is not used to long bidding wars. It needs to be interested in Amazon’s proposal exclusively or else Amazon will find another company for opportunities in the retail sector. 

In the negotiation, Amazon has the upper hand as it has the capability to inflict damage on Whole Foods Market by not pursuing the negotiation. The threats looming the Whole Foods Market will cease if it collaborates with Amazon.

Additionally, Amazon demands secrecy. Any leakage will force Amazon to terminate the negotiation. In bidding situations, secrecy is important. Any leak of confidentiality will have disastrous outcomes regarding the agreements. A non-disclosure will allow Amazon to have steadiness, speed, and information symmetries in the negotiation.  

Final Deal:

The limits of the offering price for each party are laid out in the agreement which makes them able to compute their reservation price (RP).

When Amazon first bid, it evaluated the historical value per share of Whole Foods Market which is about $35.00 per share. At first glance, the $42.00 per share bidding price of Amazon seems too high. However, the calculations of Amazon were totally inclined with the prospect of growth of Whole Foods Market in the case of an acquisition. 

The Whole Foods Market’s attempt to counter-offering the bid with $45.00 per share was just to hold onto the financial resources of Amazon. Although we must take note that Whole Foods Market does not expect Amazon to be willing to bid at a higher price. Simultaneously, Amazon expects Whole Foods Market to accept its high offer. The expectations of both parties have coincided with one another which makes the negotiation reasonable and advantageous for both parties. 

Additionally, a profitable outcome depends on how negotiators deal and discuss during the negotiation process. Being an active listener and discussing issues is pivotal in the negotiation to be successful.  

Finally, after rigorous research and consideration between one another, Whole Foods Market approved the deal with Amazon which acquired the former for $42.00 per share which amounts to $13.7 billion including its debt. 

What can we learn from it?

We learn from this case study that both parties must make an effort to retrieve data from both sides to quantify and evaluate the outcome of every possible solution. 

Another is that a good negotiator can anchor the positioning battle around the other party’s reservation price . It is important to consider the other party’s perspective to take action in their situation rather than our own. 

This will help negotiators to obtain information and interest with the other party while also building trust and a fruitful negotiation process management. 

Lastly, we can learn from their negotiation that a final outcome can be reached once both parties meet on the same ground or terms. Both sides must be convinced that there is no use to retreat when the outcome will be good and that the negotiation is about to end.

Example 2 – “Vaccine Nationalism”: A lose-lose negotiation strategy

The onslaught of the pandemic has made national governments across the world face the challenge of securing enough safe doses of COVID-19 vaccines when it becomes available.

A coordinated global plan is sought to promote fairness and efficiency. However, it may be a little too late, especially for least developed countries. 

This case study highlights the best and worst practices when pursuing limited resources through negotiation. 

In the early days of the COVID-19 pandemic, many drug manufacturers around the world focused on developing vaccines that can provide immunity to the virus without any harmful side effects. 

The governments of developed countries began negotiating with drug manufacturers to ensure that their citizens will get the vaccine first. The competition was on with developed countries while poorer countries were left on the sidelines. 

Many nations bought more than what they needed because they know that only a few vaccines will likely be safe and effective; Vaccine hoarding has now begun. 

As wealthy nations begin to outsmart each other through negotiation because of their limited resources, poor countries are left to wonder how they can protect their citizens. 

The World Health Organization (WHO) came up with a plan that aims to ensure that the vulnerable populations in the world will have access to the COVID-19 vaccine. 

On August 24, 2020, WHO announced that 172  nations that comprise over 70% of the world’s population had made commitments to participate in the COVID-19 Vaccines Global Access (COVAX) facility. 

COVAX is a global initiative to secure two billion doses of safe and effective COVID-19 vaccines from companies such as Pfizer, AstraZeneca, Moderna, etc. for the vulnerable population worldwide. 

At first glance, COVAX seems to be a charitable enterprise founded by wealthy nations. However, this is not the case. Wealthy nations see this opportunity as a win-win situation for them. 

Wealthy nations will be guaranteed access to the world’s largest portfolio of vaccines. Additionally, they will negotiate as part of the 172 nations which will bring the price of the vaccines down. 

A week after the announcement of COVAX, the previous Trump administration said that it would not be joining the global effort. The decision was inclined toward “America First”. 

Kendall Hoyt, a professor from Dartmouth’s Geisel School of medicine, said that backing out or not joining the global effort of COVAX is like passing an insurance policy. Because if none of the vaccine candidates that the United States has proved to be effective, then the nation will be left unprotected. 

Many nations that cannot afford to purchase the vaccines directly have made creative deals with other countries. For example, Pakistan has allowed China to conduct vaccine trials on its citizens in exchange for enough doses to vaccinate its citizens, especially its most vulnerable population.  

Each country has negotiated with drug manufacturers without thinking of other countries. This is normal, especially when you are procuring scarce resources. However, the problem with the vaccines can be handled better if countries have cooperated with each other instead of negotiating by themselves with drugmakers. 

In order to encourage coordination when allocating scarce resources, countries must plan ahead, show the benefits of cooperation, and take a broader view of the problem. 

When emotions are running high amidst a crisis, it is difficult to keep in check your behavior. If the perception of your country is that the others will hoard, your country will also hoard. The time to negotiate the outlines of an agreement is before the start of a crisis and not in the middle of it. 

Negotiators usually think that when they lose, the other one wins. However, this is far from the truth. Professor Max H. Bazerman from Harvard Business School explains that to move beyond this mindset, one must show what one can gain from cooperating with one another. 

Organizations always feel the special duty to protect and look out for those they represent. This is true but we should also take time to consider how our actions can affect other people. This includes the most vulnerable population in the world. 

Ingroup bias does not stop solutions that can benefit others. As a matter of fact, you can expand it by considering what those people outside of your organization can provide that will benefit you too. 

Ecologist Garrett Hardin shares the parable of a group of herdsmen who graze their cattle in the same pasture in his 1968 article.

In the parable, all herdsmen are motivated to increase the size of their respective herds to increase their profits. However, the increase in the number of cattle would mean that the pasture will be destroyed due to overgrazing. 

We can learn from his parable that the best solution to the dilemma of the herdsmen was to negotiate with one another to limit the size of their herds. 

With a finite resource at stake, those that are involved will usually have better long-term outcomes by negotiating to divide the resource equitably rather than trying to claim the biggest piece for themselves. 

If we just imagine that all the leading economies in the world agree to put all their budgets for vaccines in the COVAX or a similar global effort and not sign bilateral deals with pharmaceutical companies, then the efficiency of the coordination will help lower the cost and streamline the production and distribution. 

If countries just broaden their views in negotiating with other countries to strive for coordination, then many lives would have been spared by the pandemic.

Example 3 — Negotiation Case Study: Sincerity’s Power in Negotiation

Actual Case:

The golden donut chain, a Philippine-based company, has faced difficulty in negotiating with its labor union. The donut chain and the labor union have talks regarding their problem. 

When the donut chain’s management team arrived late with the said talks, the labor union stormed out in protest to show great dismay over their delay in the negotiation. 

In order to continue their talks with the labor union, the management team of the donut chain has sent a letter that includes an apology.

However, from the perspective of the labor union, the apology is insufficient to forgive the inconvenience that the donut chain has caused. The labor union refused to meet for talks and continue with their strikes. 

This case study has focused on how to convey your sincerity when apologizing in a negotiation. How can one deliver their sincerest apology that the other party will accept? 

The case with the golden donut chain and the labor union has ended in a bad way. Due to the lack of concession due to the insufficient apology from the donut chain, the labor Union has brought it into court. 

When both parties brought it to the courts, it took years before a party was compensated. In this case, the labor union has won the case against the donut chain. 

Professor Edward Tomlinson and Professor Roy Lewicki from Carroll and Ohio University have found out that people view apologies to be sincere when it includes internal attributions of harm. This simply means that people will see your apologies as sincere when you own up to your mistakes. 

The credibility of a person has a significant factor in making apologies sincere from the perspective of the other party. 

A study showed that unfulfilled promises, deception, and breaking the trust of the other party are some factors that a negotiator cannot work out in giving their sincerest apology. Moreover, giving assurance even if you cannot attain or fulfill it is counterproductive in a negotiation. 

Many negotiators advance their case by persuading the other party or listening to their side. But sometimes, the greatest thing you can do in a negotiation is to straightforwardly admit your mistake.

Many apologies have failed to achieve their aim—to be forgiven. The delivery of some people is usually the culprit why apologies are not accepted. 

The importance of an apology in a heated argument or negotiation cannot be overstated enough. When the other party thinks that your apology is not sincere enough to make amends, the heat in the negotiation will rise further—leaving both disliking each other. 

The power of apology in negotiation and dispute resolution is significant to fixing relations between parties. It is important to apologize and own up to your mistakes to make the other party feel that you are sincere. 

We must remember that if we cannot fulfill or attain our promise, we must not push it further to the other party. Doing so will only aggravate the emotions of the other party. Because we all know that no one wants to be left hanging—so do not promise during a negotiation that you cannot follow through. 

Example 4 — The East China Sea Dispute

Actual Case: 

In November 2013, China established an air defense zone over the disputed Islands on the East China Sea. This has been seen as an act of aggression in an escalating international dispute.

Japan and China are both claiming the islands. It is known as Senkaku in Japan and Diaoyu in China. According to CNN, the islands are believed to be rich in oil. Additionally, the islands are said to be an advantage for military defense strategically which is why the dispute on the islands is hard to resolve. 

China began patrolling the islands and its plane has come near the international airspace of Japan several times. When this happens, Japan launches its fighter jets in response to the tactics of China. Additionally, Vietnam and the Philippines had made claims to the islands as well. 

The conflict over scarce resources can be tricky and difficult to resolve. In the business field, negotiators that face this conflict are able to avoid the conflict by considering and thinking about every party’s contributions and claims with the resources. However, in our own business negotiation , how can you convince the other parties that concession is possible?

Japan has bought the disputed islands which have enraged China. Today, the tension has increased and no negotiation has been settled. In 2019, Japan built military bases to keep China from further developing its military capabilities in the region. 

All negotiators must keep in mind that the first thing they need to work out is building trust with the other party.

First, when you are negotiating with a new party or the negotiation with them in the past has not gone as planned, you cannot expect them to trust you right away. 

You must give them time to adjust. Additionally, you must let them tell their concerns, and past grievances, and apologize for any actions that have created mistrust from the other party. 

Second, when negotiators discuss agreements, they must devote a lot of time to asking questions to tackle all the issues circulating the agreement. 

By asking the other party questions regarding their positions in the negotiation, you will know their underlying interest. 

Also, you can share your information to show your own interest in the negotiation. This will allow you to unfold potential tradeoffs that are tolerable to both of you.

Lastly, negotiators must look for solutions that can make the other party whole. This means that you must let the other party know that they can benefit greatly from the negotiation. 

Demanding a unilateral concession with a corresponding benefit to the other party will make the negotiation fail. You cannot expect anyone to compromise without them gaining any benefit from the negotiation. 

What can we learn from it? 

From this case study, we can learn how to negotiate without making the outcome self-serving for any of the parties. 

We all know that during an international negotiation , even if negotiators believe that they sincerely want a fair outcome, their perspective of a fair outcome is likely to be self-serving. This kind of perspective will make the negotiator believe that they must have a greater share of the resource—making them biased on their own terms.

We can learn from here that trust is the foundation of every negotiation. Without trust, it will not be possible to produce a fruitful outcome of the negotiation. 

We must also consider the interest of the other party to make concessions that both of you will benefit from the negotiation. 

If you cannot make the other party realize that they can gain from your negotiation, the outcome of the negotiation will always fail. 

Example 5 — Negotiation in Business: Apple and Samsung’s Dispute Resolution Case Study

In April of 2011, Apple accused Samsung of copying the look and feel of its products when it launched its Galaxy line of phones. The situation has made Apple file a lawsuit against Samsung. 

However, Samsung has countersued Apple stating that it has not paid royalties for using its wireless transmission technology. After this, the number of disputed patents has gone up to the sky. 

Since then, the two giant tech companies have repeatedly accused one another of copying the appearance and functions of their respective products. 

Both companies have shown willingness for mediation in an effort to avoid going to court. Due to this, they have cut the number of disputed patents by half. However, even if the CEOs of both companies had sat down at a table for mediation, Apple started striking Samsung again.

Apple has filed a motion to bar the sale of one of Samsung’s products on the grounds that the tablet is created to replicate its second-generation Ipad. 

Both companies have hoped to avoid legal battles. However, the mediation of both companies has ended in an impasse. Neither one wants to back down from their arguments. The lawsuit has been pursued and went to trial twice and Apple has ultimately won more than $409 million.  

We must take note that both parties need to negotiate or mediate a solution before escalating it to the courts. Additionally, both parties must be willing to work together to resolve the problem or deal with the situation. 

In many situations, mediation is viewed as the last step of adjudication rather than the first step in a collaborative effort to work on a solution. 

From the standpoint of preserving the image of the organization, mediation is preferable. Mediation that leads to voluntary agreements will always ensure compliance with whatever the parties have agreed upon

For this case study, we have seen that mediation as a dispute resolution technique is not possible when both parties are grudging participants. In order for mediation to succeed, both must be actively engaged in finding a solution. 

Additionally, Both companies have already invested too much time and resources with all the lawsuits that they have bombarded one another. Due to this, they will feel that it is too late to back down as they have invested too much in it. 

The talks for concession will fail and the aggressiveness from both parties will increase the longer they spend fighting rather than finding a solution.

We can learn that when a business dispute arises, both parties must be willing to negotiate in finding a solution before they take the matters to the courts. Taking it to the courts will end any negotiation for meeting halfway.

Example 6 — Overconfidence In Negotiation

RJR Nabisco, a tobacco company, is having a bad year with its stock performance. Ross Johnson, the CEO of RJR Nabisco, has thought that it is the best time to negotiate a buyout to increase the shareholder’s value of the stock. 

As a reference, a buyout is a transaction where another party has acquired control of the company. Going back, Ross John and his management group have entered into negotiation with the special committee of the board of directors. 

Since he is the CEO of RJR Nabisco, Ross John is confident that his buyout attempt would be a successful pitch for the board of directors. Unbeknownst to him, his overconfidence has led him to fall into making bad decisions and jumping to the wrong conclusions. 

His first mistake is assuming that due to his position and connection in the company, his buyout pitch will be approved easily. 

His second mistake is assuming that his investment bankers will just simply put the financing in place. Lastly, he expected the board of directors that they would give him the entire power to manage the buyout. 

Along with Shearson Hutton, his main financial partner, they offered an initial buyout price of $75 per share. 

Ross Johnson’s overconfidence in closing the buyout has led him to his impending downfall. He was not paying attention to numerous occurrences that were happening at that time. Instead, he had gone on in his self-interest. 

The board of directors has never discussed or met halfway with Ross Johnson regarding the buyout. Additionally, it never occurred to him that there were other companies who wanted to buy Nabisco. 

Following the series of events, his attitude has led the board of directors to award the buyout bid to an investment bank firm, Kohlberg, Kravis, and Roberts (KRR), for $109 million. 

In actuality, the bid of Kohlberg, Kravis, and Roberts (KRR) is lower than Johnson’s Bid. The board just wants to get off Ross Johnson from their shoulders even if it means that they would take a loss. Although it is lower, they appreciated the KRR’s negotiation flexibility.  

The solution here in this negotiation case study is to avoid overconfidence in negotiation. It is okay to have confidence, but overconfidence will make your judgment hazy.

There is a thin line between confidence and egotism. Unfortunately, in the case study, he becomes so full of himself that he does not consider the factors and the events that are transpiring at that time. 

Being confident is knowing that you have prepared for the negotiation. Additionally, you will know your limit and the do’s and don’ts when negotiating even if you know the other party all too well. 

To reduce your overconfidence, you must first collect information. When the stakes are high, you must put down the mirror to stop admiring yourself. Instead, you must know the information about the other players in the game. The collected information will allow you to use it to your advantage when negotiating. 

Second, you must consider the other party. One of the best ways to correct biases such as overconfidence is to think of reasons why your assumptions are wrong. This will allow you to keep your attitude and your assumptions in check. 

Third, you must ask other people in your organization about your assumptions. Good negotiators base their decisions on the data or information available and not on the information that will just make them feel good. 

Lastly, you must not be afraid to ask. Many people avoid negotiation because it is stressful. In the part of the case study, Ross did not ask questions to the board. Rather, he has carelessly gone on with the buyout. His attitude and assumption about the buyout have failed him ultimately.  

Negotiation courses usually suggest that business managers should possess a high level of confidence to succeed. 

This is correct as confidence will allow managers to face any challenges in the fast-paced environment that they are in. However, there is a thin line between being confident and overconfident. 

Overconfidence is a cognitive bias that lurks in the background. It is like a trap waiting for you to get caught as you innocently walk. 

Overconfidence can cause you to become indifferent to the available information. Additionally, it will always cause you to miscalculate things by making assumptions. 

We must always assess ourselves if we are already being overconfident because it will always lead us to make wrong decisions and baseless assumptions. 

Example 7 – The Microsoft-Nokia Deal

According to the New York Times, on September 3 of 2013, Microsoft announced a deal to acquire Nokia’s handset and services business for $7.3 billion. 

The agreement has marked a bold move to the side of Microsoft to upgrade its game in the handset competition. Additionally, it ends the struggle for Nokia to re-enter the phone market where it once ruled. 

The deal explores the dynamics behind the negotiation that has made Nokia join forces with Microsoft. Both sides had a strong urge to join forces. 

Through the years, the struggle of Nokia to re-enter the phone market has lost significant ground to smartphone manufacturers such as Samsung and Apple. It has failed to keep up with the latest innovation in the market which has severely impacted its profitability. 

Nokia’s underperforming handset business has made its focus on telecommunications equipment, mapping business, and patent portfolio. 

Steve Ballmer, the previous CEO of Microsoft, first approached Nokia’s CEO, Stephen Elop, for a possible acquisition during the Mobile World Congress industry conference in Barcelona. 

Their first meeting started the discreet negotiation between Nokia and Microsoft.

Microsoft’s acquisition of Nokia means that it has to know its cultural background before negotiating. 

According to a report from the Program on Negotiation at Harvard Law school, there are four simple rules to handle cultural differences in international negotiations. 

First, you must research your supplier’s culture. In the case of Microsoft, it must know the culture of Nokia to know what are the dos and don’ts in their negotiation. 

Second, you must show respect for cultural differences. Microsoft has to understand the value system of Nokia. 

Third, you must be aware of how others may perceive your culture. Microsoft needs to carefully analyze how its gestures in the negotiation may affect the deal. Being aware of their culture will allow you to be able to adjust your negotiation in order to close the deal. 

Lastly, you must always find ways to bridge the cultural gap. The cultural differences create division between Microsoft and Nokia. If Microsoft knows how to come to terms with Nokia, then the negotiation process will be much easier than being insensitive to each other’s perspectives. 

Acquiring another company is not an easy process. It entails overcoming its greatest challenge —  cultural barriers in negotiation. 

Merging different cultures can be confusing and a lengthy process. Merging two of the largest companies in the world is difficult as both will have embedded roots in their respective country. 

It makes sense to keep the identity of the organization and borrow from the best of both. It never hurts to create strategies that are based on the expected cultural norms of the acquired company as long as it is a part of the bargaining process which creates valuable, workable, and sustainable agreements. 

Example 8 — After the West Coast Ports Conflict, Damage Remained

In a crisis negotiation, parties may believe that they face an impossible choice between giving in to the other side’s demands or standing firm with their decision resulting in the worst-case scenario to happen.

This is the case with the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). The lack of agreement between the two parties quickly became a problem. 

The ILWU-PMA contract expired on July 01, 2014. Since the month of May, the parties have met to negotiate a new agreement regularly. During this period, the ILWU claims that it has consistently come to discuss the agreement in good faith despite the other party’s pressure tactics. 

The spokesperson from the PMA has said that both parties agreed that normal operations at West Coast ports would continue even if no agreements have been reached but the ILWU has backed out of the agreement.

However, after a few months, PMA has accused the ILWU of orchestrating slowdowns at the Pacific Northwest ports of Seattle. It alleges that the slowdown at the port has resulted in the reduction of terminal productivity by 40 to 60%. 

Following these events, the ILWU has issued a statement that according to experts, the cause of the congestion is the result of three factors that are deeply rooted in employer management. 

In the case of LIWU and PMA, both have already plunged themselves into crisis negotiations. Fortunately, both parties have already reached a deal in 2015 but still, we cannot change the fact that there are ways that can help the parties avoid the need for crisis negotiation. 

First, to avoid crisis negotiation, you must build trust in its early phase. You should not wait for an urgent deadline to come before you do something. Take advantage of launching negotiations early to establish trust. Furthermore, check on the other party periodically to ensure that you can mutually address any issue before it is too late to be fixed. 

Second, you must be aware of overconfidence. Crisis negotiation often arises because of the overconfidence of one party in the negotiation. To prevent this, you must think of possible scenarios and prepare for each of them accordingly. 

Third, you must avoid extreme demands. A demand increases the tendency to escalate commitment to tough positions. You must resist drawing a line in the sand. 

Lastly, you must seek an outside opinion. Third parties can give a dose of rationality in crisis negotiations. This allows you to have an objective critique of your plans that will result in meeting all the parties’ interests in the negotiation. 

We can learn from here the adage,” prevention is better than cure.” If the parties have discussed their interests early, the congestion will never happen. Partnered with the contentious history of both parties, the crisis negotiation is bound to happen. 

In addition, it is important to build trust in its early phase. This will build a foundation that will allow both parties to resolve any issues that will arise together. 

If there ever have been any heated arguments in the past, it is important to take note that the party who has delayed on their promise apologizes sincerely. 

Also, we must take note that in a negotiation, both parties must see that their interest will be met. There can never be any negotiation if the other one feels that it got the short end of the stick. 

Example 9 — International Negotiations: North and South Korea Talks Collapse

In June of 2013, North Korea and South Korea were supposed to meet in Seoul to negotiate how they can forge a rapprochement due to their decades of division. 

If this happened, it would be the highest government dialogue between the divided nation in years. 

After this, news came out that South Korea had appointed its vice unification minister as the chief delegate to the negotiation that will occur.

North Korea was offended by this move made by South Korea. It demanded that South Korea send its more senior officials. South Korea defends itself and has responded on the issue that the proposed delegate of North Korea is lower in status than what it has delegated. 

The night before the scheduled talks begin, North Korea accused the South that their response is an insult to them. South Korea is still open to dialogue but it will not back down with its delegation. 

When South Korea criticizes North Korea’s argument, it has risked the latter in embarrassment. According to a study by experts, direct threats to self-esteem can trigger anger, embarrassment, and competitive behavior toward the other party. 

We know that some people are slightly more sensitive than others. When slightly-sensitive people negotiate with others, they are twice as likely to declare an impasse even if the agreement will benefit both sides. 

Research has concluded that when slightly-sensitive people are personally invested with the issue that is being negotiated, they are more susceptible to feeling threatened and acting competitively.

In the case of South Korea, it has neglected the value of helping North Korea to save face or to protect its image. It is the mistake of South Korea that made the negotiation meet its dead end. 

Many experts have criticized the government of South Korea for ruining the chance to engage with the North. 

In this case study, we can learn that protecting the image of the other party in the negotiation is important to reach a fruitful discussion. 

Of course, no one wants to be put in a situation where you will be a laughingstock in the eyes of the public, more so when it comes to international negotiation.

Example 10 — Why Ethical People Become Unethical Negotiators

Bernie Madoff, the person who ran the largest Ponzi scheme in history that is worth about 64.8 Billion dollars, did not pull off the scam by himself. 

To give a brief review of his infamous scheme, we will go back on how he attracted investors by claiming to generate large returns through an investing strategy that is called split-strike conversion which is a legitimate trading strategy. 

However, he deposited the client funds into a single account which he used to pay existing clients who wanted to cash out. The 2008 financial crisis has made him unable to maintain his fraud . On December 10 of 2008, he confessed his fraudulent act to his son who has worked in his firm. 

Long story short—a lot of investors put their trust in him due to his facade as a respectable financier in the industry.  

According to professor Max H. Bazerman, good people that have strong ethical values can trick people without realizing that they are doing it. 

He draws on the psychological study of ethical decision-making and applies it to negotiation. He tells us that negotiators usually act unethically due to the desire of gaining high profits and greed. 

Negotiators may exaggerate things that are far from the real thing which falls into the category that Bazerman calls bounded ethicality. You may ask why it happens. Well, it happens once the negotiation progresses. In the heat of the negotiation, it is where ethical fading begins. 

Negotiators fail to see what they are doing as they are only focused on one thing—high profit. Many people interpret situations that will favor them.

According to Bazerman, deception occurs at the negotiation table, especially during the preparation, participation, and recalling of the negotiation phase . Participation in negotiation is the most susceptible phase where ethics fall. This is due to the fact that negotiators will only want to negotiate what makes sense for them. 

In recollecting or remembering the negotiation that transpired, the negotiator fails to see the other party’s perspective. 

We can promote ethics at the negotiation table by encouraging negotiators to slow down and consider important decisions. They should mask the gender and the picture of the applicant to lessen the bias in the process

Negotiators should also know that language matters. Using words like Ultimatum and winning can unintentionally set the negotiation for deception. 

What Can We Learn From It?

We can learn that negotiators that become aware of their susceptibility to deception, will be lessened at the negotiation table. 

Negotiators must be able to reflect and deliberate all the important decisions before dealing with someone at the negotiation table. 

Once you see that something is wrong but you failed to notice due to your focus on the high returns, that is when ethics fade. 

Featured Download : Want to get better at negotiation skills? Click here to accelerate your career: Negotiation Preparation Toolkit template to help you prepare for your upcoming negotiation.

In conclusion, the provided case studies offer valuable insights into the complexities of negotiation across various scenarios. Negotiation is a skill that extends beyond business transactions, encompassing international relations, legal disputes, and even internal organizational dynamics.

These examples underscore the importance of preparation, cultural awareness, trust-building, and ethical considerations in successful negotiations.

How important is trust in negotiation?

Trust is fundamental in negotiation. It fosters open communication, collaboration, and a willingness to find common ground. Without trust, negotiations become challenging, and parties may struggle to reach mutually beneficial agreements.

How can cultural awareness impact negotiations?

Cultural awareness is crucial in negotiations. It influences communication styles, decision-making processes, and the perception of gestures and actions. Ignoring cultural differences can lead to misunderstandings and hinder the negotiation process.

Why is ethics essential in negotiations?

Ethics are vital in negotiations to maintain integrity and build sustainable relationships. Even well-intentioned individuals can engage in unethical practices, especially when driven by financial gains. Prioritizing ethical considerations ensures fair and honest negotiations.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

• Contract Management

Supplier Management

Savings Management

• Data & Security

FAQ’s

oboloo Articles

Project procurement demystified: lessons learned from a real-life case study.

Are you curious about what project procurement is and why it’s important? Do you want to learn more about the different types of project procurement , their pros and cons, and what to consider when implementing them? If so, then this blog post is for you! We’ll also be sharing a real-life case study of project procurement and the lessons learned from it. So get ready to demystify project procurement and discover its potential benefits for your projects.

What is Project Procurement?

Project procurement refers to the process of acquiring goods and services from external sources to support a project’s objectives . This includes identifying the necessary resources, selecting vendors or contractors, and negotiating contracts .

The ultimate goal of project procurement is to ensure that your project has access to the required resources at an optimal cost . It involves managing risks associated with suppliers, ensuring compliance with legal regulations, and maintaining quality control throughout the supply chain.

Procurement is essential for projects as it helps you manage costs effectively while maintaining high standards of quality. Additionally, it can help mitigate risks by diversifying your supplier base and building strong relationships with key partners.

Successful project procurement requires careful planning and management to ensure that all goods and services are procured in a timely manner at good value for money. By doing so effectively, you can set up your project for success right from the start.

Why is Project Procurement Important?

Project procurement plays a critical role in the success of any project. It involves acquiring goods, services, or works from external sources through different types of contracts .

One of the main reasons why project procurement is important is that it helps to ensure that projects are completed on time and within budget constraints. By procuring resources and materials at the right time and price, project managers can minimize delays and cost overruns.

Effective project procurement also enables organizations to tap into specialized skills and expertise that may not be available internally. This allows businesses to deliver quality results that meet or exceed client expectations.

Another benefit of project procurement is risk management . Procurement activities involve assessing supplier capabilities, evaluating risks associated with suppliers’ performance, and developing mitigation strategies for potential disruptions in supplies or services.

Implementing sound project procurement practices promotes transparency and accountability throughout all stages of the procurement process . It ensures fairness in selection processes for suppliers while promoting ethical business practices.

Project Procurement is one crucial component of successful projects as it helps manage costs while ensuring timely delivery with high-quality standards met consistently by every stakeholder involved in a particular undertaking.

The Different Types of Project Procurement

When it comes to project procurement, there are several different types that can be used depending on the specific needs and requirements of a project . The most common types include:

1. Traditional Procurement: This is the most common type of procurement where a client contracts directly with one or more suppliers for goods or services needed for their project.

2. Design and Build Procurement: Under this type, the contractor takes complete responsibility for both designing and building the required deliverables within an agreed-upon budget.

3. Construction Management Procurement: Here, construction management firms act as advisors to clients while subcontractors are contracted separately by the client.

4. Joint Venture Procurement: In joint venture procurement, two or more companies come together to bid on projects where their combined expertise can add value to a project.

Each type has its own benefits and drawbacks that should be carefully considered when deciding which one is best suited for your particular situation. By understanding these different types of procurement methods available, you can make an informed decision about which will work best for your business needs.

Pros and Cons of Project Procurement

Project procurement has its advantages and disadvantages that need to be taken into consideration before implementation.

On the positive side, project procurement allows for a greater pool of suppliers, leading to increased competition which ultimately results in cost savings . Procurement also ensures that the highest quality materials are used as suppliers are held accountable for their products.

Additionally, it creates clear expectations and responsibilities between parties involved in the project. This helps with risk management while improving communication between all parties involved including stakeholders and vendors.

However, there are some drawbacks to consider when implementing procurement methods . One major challenge is that it can prolong the bidding process which may delay project completion timelines .

Furthermore, contractual disputes may arise due to differing interpretations of contract terms causing delays or even legal action to resolve these issues.

It’s important for businesses considering procurement procedures carefully weigh both pros and cons before making any decisions about this method for their projects.

What to Consider When Implementing Project Procurement

When implementing project procurement, there are several things to consider. First and foremost, it is important to have a clear understanding of the goals and objectives of the project . This will help determine what type of procurement method is most appropriate.

Another important factor to consider is the budget for the project . It’s crucial to ensure that all procurement activities stay within budget constraints in order to avoid any unexpected costs or delays during the project.

The selection process for suppliers and vendors should also be carefully considered. It’s essential to evaluate potential vendors based on their experience, reputation, quality standards, delivery schedules and compliance with your organization’s policies.

In addition, communication among stakeholders must be effective throughout implementation. Communication will help ensure expectations are effectively managed while providing transparency throughout each phase of procurement implementation.

Monitoring and controlling vendor performance should be established when implementing Procurement processes by creating metrics against which performance can be measured consistently including underperformance penalties if necessary.

By considering these factors when implementing Project Procurement you can establish better processes that aligns with both business needs & organizational regulations while delivering successful outcomes.

A Real-Life Case Study of Project Procurement

At the heart of every project lies procurement, which can make or break a project’s success . A real-life case study serves as an excellent example of how important it is to get procurement right.

The case study involved a construction company that won a contract for building a hospital. The company was responsible for procuring all the materials and equipment needed for the job. However, they faced several challenges during the procurement process .

One of the biggest challenges was sourcing quality materials and equipment within budget constraints. They had to balance cost with quality while ensuring timely delivery . Additionally, they also had to deal with unexpected delays due to unforeseen circumstances like weather conditions.

Despite these challenges, the company managed to deliver on time by implementing strict procurement processes and protocols. They established clear communication channels between stakeholders involved in procurement such as suppliers, contractors and internal departments.

This real-life case study shows that effective project procurement requires careful planning, efficient execution and constant monitoring. It emphasizes that successful procurement requires collaboration between all parties involved in order to ensure timely delivery without compromising on quality or exceeding budget constraints.

Lessons Learned from the Case Study

The real-life case study of project procurement provides valuable lessons for any organization involved in a similar process. One of the most important takeaways is that communication is key to success . It’s essential to establish clear lines of communication with all parties involved, including suppliers and stakeholders.

Another lesson learned from this case study is the importance of risk management . In any project procurement process , there are always risks involved, whether they are related to cost overruns or delays in delivery. Therefore, it’s crucial to identify potential risks early on and have contingency plans in place.

Moreover, collaboration and cooperation among team members are vital factors for successful project procurement processes . The involvement of all stakeholders in the decision-making process can lead to better outcomes and reduce conflicts that may arise during the implementation phase.

Additionally, having a well-defined procurement strategy can help organizations achieve their goals more efficiently while reducing costs and minimizing risks. A good strategy should consider both short- and long-term objectives while taking into account external factors such as market trends and supplier performance metrics .

Continuous improvement is necessary when dealing with project procurement processes as every experience brings new challenges that require innovative solutions tailored specifically for your organization’s needs.

Procurement is an integral part of project management that involves acquiring goods and services from external sources. It plays a crucial role in the success of any project, as it ensures that all required resources are available at the right time, cost and quality.

In this article, we have discussed what project procurement is, why it’s important, its different types, pros and cons, and what to consider when implementing it. We also provided a real-life case study of how procurement was successfully implemented in a major construction project.

From our case study analysis, we learned several lessons on how to effectively implement procurement strategies for projects. These include proper planning and risk assessment before choosing a procurement method; clear communication with suppliers throughout the process; continuous monitoring of supplier performance; among others .

It’s essential to note that every project has unique requirements which may require specific approaches in selecting appropriate procurement strategies . Therefore careful consideration should be made before choosing one method over another.

In conclusion, Project Procurement can make or break your business if not well managed . A thorough understanding of the different types available will enable you to select suitable options for your business needs while weighing benefits against risks associated with each option.

Want to find out more about procurement?

Access more blogs, articles and FAQ's relating to procurement

The smarter way to have full visibility & control of your suppliers

Contract Management 

Partnerships 

Charities/Non-Profits

Service Status

Release Notes

Feel free to contact us here. Our support team will get back to you as soon as possible

Sustainability

How a Global CPG Leader Optimized $500M of Direct Materials Spend and Exceeded Savings Goal With GEP

Case studies.

Read our case studies to see how our clients, including hundreds of Fortune 500 and Global 2000 enterprises, leveraged our supply chain and procurement technology solutions and strategies to overcome significant challenges.

These stories offer an in-depth view of our client engagements and explain exactly how we secured excellent outcomes.

GEP Helps Fortune 500 Tech Company Optimize Inventory, Free Up $1 Billion in Working Capital

Oil & Gas

Large oil & gas company transforms procurement operations with gep smart.

Consumer Packaged Goods

How a global fast-food chain saved $22m on a key raw material category with gep.

Leading Telecom Company Saves $25 Million Through eAuctions by Partnering With GEP

Global Fast-Food Chain Develops Supply Risk Mitigation Strategy With GEP

Real Estate Leader Centralizes Procurement, Saves 20% on Addressable Spend

Leading Retailer Achieves 40% Reduction in Cost of Goods Sold and 16% Improvement in Gross Margins

UK Chemicals Giant Achieves 55% More Savings Than Targeted With GEP's Expertise

How a Global CPG Leader Optimized $500M of Direct Materials Spend and Exceeded Savings Goal by Partnering With GEP

Key insights.

Procurement and supply chain leaders worldwide look to GEP for process, technology and industry expertise, and we are happy to share our learnings from years of complex problem solving. The GEP Knowledge Bank encompasses proprietary research, issue-orientated white papers and webinars, case studies, and playbooks and primers.

• Category Management (168)
• Supply Chain (288)
• Source to Pay (464)
• Finance (4)
• Procure to Pay (96)
• Procurement Strategy (379)
• Sourcing (209)
• Spend Management (122)
• Procurement Technology (307)
• Procurement Transformation (179)
• Supplier Management (106)

Send us your question(s)

Request for a business proposal

Share your thoughts, comments and suggestions

Schedule a live demo of our software

Vehicle Operator Recruitment, Retention, and Performance in ADA Complementary Paratransit Operations (2010)

Chapter: chapter 10 - case studies of procurement and contracting best practices.

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

108 It has been estimated that between 70% and 90% of ADA paratransit programs use one or more contracted operators. Some systems also use contractors to perform reservations and scheduling and sometimes the dispatch function as well; depending on the contractual arrangements and relation- ships, these can be part of a turn-key operation contract or could be a contract for call center management or brokerage management services, with separate contracts for operations. Because the use of contractors for ADA paratransit is so pre- dominant, the ways in which contractors are procured bears examination relative to their impact on the recruitment and retention of operators. Some transit agencies include in their procurement docu- ments (RFP, sample contract) terms and/or requirements that result in effective operator recruitment and a low turnover rate. For example, some transit agencies have developed procure- ment documents that specify a minimum vehicle operator wage rate or “livable wage rate” or even a “competitive wage rate.” Moreover, some transit agencies have asked in their RFP for proposers to provide detailed information about wage rates and the fringe benefits that are available to operators. These agencies have discovered that it is not sufficient to question whether or not a proposer offers health care coverage to its employees, which only tells half the story; a follow-up and more illuminating question asks for the percentage of health care premiums that the employee must contribute. For exam- ple, if the percentage contribution is unrealistically high for an employee, health insurance effectively becomes unattainable. Other transit agencies in their procurement documents have emphasized the importance of operator recruitment and the retention of a stable work force in a more circuitous manner by (1) including evaluation criteria and/or bonuses paid to the contractor for achieving a certain level of operator retention and/or (2) requiring or providing bonuses for 100% pull-out coverage. By including such terms, these transit agencies are working to discourage the submission of proposals that include low operator wages, which are too often a casualty of the compet- itive bidding process. The goal is to generate competitive cost proposals that also accurately reflect competitive vehicle oper- ator wage rates and fringe benefits and result in a more stable vehicle operator workforce. The objective of this portion of the research was to collect best practice examples of procurement documents that directly or indirectly resulted in a fair vehicle operator compensation pack- age and to determine how positively those strategies effected operator recruitment and retention. Approach and Methodology The first step in the research was to identify transit systems who indicated in the national survey that they crafted their pro- curement documents to contain one or more of the following provisions: • Statements that a stable, experienced operator workforce was expected, along with evaluation criteria that put more weight on proposals that include effective vehicle operator recruitment and retention efforts or which otherwise evi- dence how this is to be achieved. • Requirements to provide detailed information about spe- cific operator recruitment and retention activities and the associated level of effort and cost specific to each effort. • Requirements for a minimum operator wage rate or “living wage” or favorable or competitive operator wages rates, along with additional requirements to provide details of the operator wage rates, including training wage rates, starting wage rates, and maximum wage rates per vehicle type if appropriate for each year of the contract. • Requirements to provide detailed cost information or assumptions about the levels of fringe benefits provided and the required employee percentage of contributions for health care insurance for each category of employee (single, married, family, etc.). C H A P T E R 1 0 Case Studies of Procurement and Contracting Best Practices

• Requirements to provide total and average operator wages and fringe, and the assumptions upon which that total cost is based, e.g., number of full-time and part-time operators, average shift lengths, total service hours by operator type and how that was calculated, and total operator pay hours by operator type and how that was calculated. • Requirements to achieve certain standards for operator retainage (or turnover) and/or to maintain a sufficient oper- ator work force or surrogate measure, such as achieving a certain standard for pull-out coverage; as part of this requirement, the specification of bonus payments for achiev- ing these standards or penalties for not achieving these standards. Among the respondents to the national survey, 26 public transit/paratransit agencies indicated that they included such language in their RFPs and contracts, and 14 of these 26 agen- cies indicated that they had had moderate or good success as a result. These 14 systems and the success indicated are shown in Table 10-1. The following summarizes those results: • Eleven agencies reported moderate or good success with conveying that a stable and experienced work force was expected. Of these, ten stated that this was mentioned in the RFP, and seven stated that they included this as an eval- uation criterion in rating the proposals. • Seven agencies indicated moderate or good success with the inclusion of a living or minimum wage standard. • Nine agencies indicated moderate or good success with incentives and penalties related to maintaining an adequate workforce and/or covering runs. Follow-up contact was made with these 14 agencies to obtain more detailed information. Follow-up contact focused on the following: • Determining whether any measurable improvements to service could be traced to the procurement/contractual provisions; • Obtaining procurement/contract documents to get the exact language used (or point systems used in the case of evaluation criteria); and • Discussing their perspectives and experiences with these strategies. An attempt was made to also interview one contractor from each system to get a contractor perspective on the pro- curement process or contract provisions. Thirteen of the 14 agencies responded, and detailed infor- mation was gathered from 12 of these systems. The research team was able to obtain a contractor perspective for 11 of the 12 systems contacted. Information from 11 of the systems contacted is included in the mini case studies below. Lessons Learned The data obtained in this study provided a strong and com- pelling case for the positive effect that certain ADA paratransit contractor procurement and contract provisions have on oper- ator recruitment and retention of the paratransit contractors. The following are lessons learned: • Transit agencies that included clear expectations of a stable, experienced operator workforce in their RFPs often did report lower rates of operator turnover. The language in the RFPs did appear to encourage potential bidders to improve compensation and focus more on efforts to maintain a sta- ble operator workforce. In most cases, performance penal- ties did not have to be imposed because compliance with goals and contract provisions was achieved. • Operator compensation stands out as the key determining factor of operator recruitment and retention. Even in areas without a municipal living wage ordinance, it was found that contractors who paid more per hour than lower-paying companies tended to see a reduction in turnover. Other efforts, implemented along with wage increases were also reported to achieve lower turnover. • Contractors who were able to evidence in their proposals a successful track record of operator retention in their pro- posals claim to encounter minimal challenges in securing contracts and in implementing new contracts. At the same time, those agencies that did not include such expectation or requirement in their RFPs claim to value this experience when selecting a bidder. • The comparative importance of cost versus service quality varied somewhat amongst transit agencies as an evaluation criterion, though it is important to note that the agencies valuing service quality over cost consistently reported high satisfaction with their operating contractor(s). For many procurements, the evaluation process is conducted in two independent phases: first a technical evaluation and then a price evaluation; and in at least one case, the two phases were undertaken by two different evaluation committees. • Decreases in operator turnover rates and increases in ser- vice productivity were reported by agencies that selected contractors which evidenced competitive compensation packages and a commitment to maintaining a well-trained, experienced operator workforce. One agency was able to more than double its number of service hours provided as a result of the contractors’ ability to maintain operators who were capable of meeting an increased level of service demand. Whether expressed in evaluation criteria or contractual requirements, it is evident from the research that transit agen- cies that recognize the benefits of using contractors that can 109

City Transit Agency Living or Minimum Wage Standard in RFP Incentives and/or Penalties for Maintaining Adequate Workforce or Covering Runs Mentioned in RFP Evaluation Criteria Columbus, OH COTA Moderate Moderate Moderate Good Dallas, TX DART Moderate Moderate Good Denver, CO RTD access-a-Ride Good Good Good Good Everett, WA Community Transit Kalamazoo, MI Kalamazoo Metro Transit Good Good Los Angeles, CA Access Services Madison, WI Madison Metro Transit Moderate Good Good Nashville, TN Nashville MTA Moderate Moderate Moderate Orange County, CA OCTA Good Good Good Lake Worth, FL Palm Tran Good Moderate Phoenix, AZ Phoenix Public Transit Moderate Moderate Moderate Moderate Moderate Moderate San Diego, CA San Diego MTS Moderate Moderate San Mateo County, CA Redi-Wheels Good Seattle/King County, WA Access Transportation "Stable, Experienced Workforce" Table 10-1. TCRP project F-13 survey respondents indicating moderate or good success with operator recruitment/retainage as a result of procurement/contractual provisions.

attract and maintain a stable, experienced operator workforce attract contractors who either share this recognition or who modify their practices to achieve this goal. The following case studies summarize the approaches taken by 11 selected systems that were studied. Outcomes and expe- riences, as well as a contractor perspective on the changes, are provided. Case Studies Dallas Area Rapid Transit (DART), Dallas, TX DART is the regional transit authority serving the Dallas metropolitan area, including the city of Dallas and 12 sur- rounding cities. DART has approximately 130 bus routes, 45 miles of light rail transit (DART Rail), 75 freeway miles of high occupancy vehicle (HOV) lanes, and an ADA paratran- sit service. DART and the Fort Worth Transportation Author- ity (the T) jointly operate 35 miles of commuter rail transit (the Trinity Railway Express or TRE), linking downtown Dallas and Fort Worth with stops in the mid-cities and DFW Inter- national Airport. Use of Contractors for ADA Paratransit DART’s ADA paratransit service, called Paratransit, is organized as follows: DART staffs a call center that includes the reservations, scheduling and dispatch function for the entire system. DART also provides staff for contract admin- istration, eligibility certification, and customer service func- tions. Veolia Transportation, under contract to DART, oper- ates the service with a fleet of 186 vehicles supplied by DART. The contract payment structure includes a monthly fixed amount to cover fixed costs, a variable hourly rate for opera- tions, plus reimbursement for tolls. Procurement/Contractual Provisions In the survey, DART reported that it had moderate success with specifying a minimum wage rate in its procurement and contract documents and significant success with liquidated damages for uncovered runs. With respect to the minimum wage requirement, DART staff stated the following: We make it clear that we expect experienced, trained opera- tors; by setting the bar high, we have a better chance securing such a workforce through the contract. As a rule, happy people make contented workers. A contented workforce makes good decisions and they are reliable. Requiring the contractor to pro- vide a minimum or living wage helps to ensure a more contented workforce. Left to themselves, contractors will try to keep wages as low as possible. This low rate will eventually cause personnel to leave. The turnover rate increases and valuable experience and skills are diluted or lost. In DART’s solicitation, the two provisions related to the workforce were the following: Operators Minimum Wage Rates and Incentive Programs All persons employed as operators for performance of this con- tract or any subcontract hereunder shall be paid not less than $10.00 per hour while in training. The minimum wage standard imposed is a minimum and the Contractor is required to employ a systematic evaluation program and benefit package designed to encourage retention of well qualified and good performing oper- ators for the duration of the contract. Toward this end, the Con- tractor shall establish progressive wage increases beyond the train- ing level and offer such increases to employees who successfully graduate from the training program. Operators and mechanics shall also be provided a minimum of three (3) sick days as part of the benefit program. Failure to comply with this provision shall constitute noncompliance with the terms of this contract. Schedule of Liquidated Damages for Uncovered Runs Liquidated damages in the amount of $350 per occurrence shall be assessed for unavailability of operators or vehicles at Contractor scheduled operator report/clock-in time. The Contractor Perspective The Regional Manager for Veolia Transportation and for- mer General Manager for this contract felt that the minimum wage rate/sick day provision has contributed more signifi- cantly to operator retainage than the uncovered run provision. He reported that competitive wage rates and benefits attract a “higher-quality” job applicant which results in less voluntary attrition, whereas the liquidated damages for uncovered runs are more to ensure that operators depart on time. Reported Results The Regional manager reported that voluntary operator attrition totals no more than five or less operators per year since the RFP/contractual provision for minimum wage and sick day benefits was instituted. Denver Regional Transportation District (RTD), Denver, CO The Regional Transportation District (RTD) is the regional transportation agency for the Denver metropolitan area. The RTD has 140 local, express, and regional bus routes and six light rail lines that provide 35 miles of light rail service. The RTD also has three demand-response services: (1) call-n- Ride, a general public dial-a-ride in several neighborhoods that cannot sustain fixed-route bus service; (2) access-a-Ride, its ADA paratransit services; and (3) access-a-Cab, a supple- mental (non-ADA) taxi subsidy program that is available to access-a-Ride customers. 111

Use of Contractors for ADA Paratransit RTD’s ADA paratransit service is organized as follows: RTD contracts with First Transit to operate its paratransit call center. As part of this contract, First Transit provides reser- vations, scheduling, and dispatching services for access-a- Ride, and reservations for access-a-Cab. RTD has separate contracts with four different carriers to operate access-a-Ride services in Denver: Global Transportation, MV Transporta- tion, Special Transit, and Coach USA. Special Transit is also contracted for service in Boulder, CO. The call center con- tractor develops the daily schedules and transmits daily run manifests to each of the contractors. Procurement/Contractual Provisions In the survey, RTD reported that it had had significant suc- cess with (1) specific evaluation criteria for a stable experi- enced workforce; (2) requiring proposers to provide wage scales, and (3) specifying liquidated damages for uncovered runs. With respect to these strategies, the RTD access-a-Ride service manager attached the following note: Points are assigned via the evaluation process for a range of issues such as understanding and approach to the RFP, firm and staff experience and costs. While we do not mandate specific wages, we do identify current wage scales. Liquidated damages and incentives are designed to motivate contractors to perform within acceptable service standards. The relevant provisions in RTD’s paratransit RFP are: • Proposal Evaluation Criteria for Wage Rates. Proposers who state that they will maintain (or increase) the current wage scales are given points accordingly. Proposers who state that their wage scales are below the current ones are marked down. The purpose of this is to maintain a consis- tency in the wage scale from one contract to the next. RTD views this evaluation criterion as a significant contributor to this goal, which in turn has contributed to low operator attrition rates. • Contract incentives and/or penalties related to maintain- ing an adequate vehicle operator workforce or covering all runs assigned. As a contract provision, RTD assesses a $500 fine for each uncovered run, whether it is a result of not enough operators and/or not enough vehicles. On days when there are an unexpected and large number of operator call-outs, a carrier may not be able to cover all of the runs. In this circumstance, RTD allows a carrier to re-distribute trips from light runs to other runs where these trips might fit. However, in some cases, this may not be possible, and the carrier has no other choice but to give back the run. In this case, a $500 fine is assessed per “give-back.” This provision is thus an inducement for a carrier to size an extra board correctly and for the carrier to have a back-up plan for call- ing in operators willing to work overtime. The Contractor Perspective The Executive Director of Special Transit had a slightly dif- ferent take on the provisions in the RTD’s procurement/ contractual document, indicating that the provisions had per- haps less significant impact on vehicle operator recruitment in actual practice but also acknowledging that the liquidated damages for uncovered runs did provide an impetus for Spe- cial Transit’s maintaining a sufficient roster of operators. She stated that the challenge for Special Transit is to balance the potential for liquidated damages against the cost of having excess operators, since the Call Center contractor (First Tran- sit) can cut runs at any time. She added that RTD’s practice of providing transit passes to contractor operators (at no cost to the operators) had a positive impact on Special Transit’s ability to recruit and retain operators. Reported Results Special Transit reported an annualized operator turnover rate of about 35% for its access-a-Ride service in Denver. Interestingly, the Executive Director also reports a 0% turn- over rate for its access-a-Ride operators in Boulder. She attributed this dramatic difference to the fact that the Denver operators are unionized, and the Boulder operators are not (Special Transit inherited a union shop when it took over the entire regional service in 2000 on an emergency basis for RTD). She further explained that the seniority-based shift- bid process (which is required by the union agreement) results in the newer operators getting the worst shifts (nights, week- ends, etc.), and that the operator turnover in Denver is most acute among the newer operators. In contrast, Special Tran- sit has more flexibility in matching individual operators’ needs with shift requirements in the Boulder operation. Attrition Rate. RTD reported that its contractors have experienced operator attrition rates ranging from 20% to 35%. Run Coverage. RTD indicated that since the run coverage provision was instituted, the average number of “give-backs” have been reduced from 5 per week to perhaps 1 per month. Community Transit, Everett, WA Community Transit is a special-purpose municipal corpo- ration providing public transportation services in Snohomish County, WA. Community Transit’s services include fixed-route transit, vanpool, ride-matching, and paratransit (DART). In 2004, over 8 million passenger trips were made on the system, and Community Transit carried 57% of all Snohomish County- 112

Seattle commuters to work and back. The entire bus fleet is wheelchair accessible, either by low-floor ramped vehicles or buses equipped with wheelchair lifts. Dial-a-Ride Transportation (DART) is Community Transit’s ADA paratransit service. With an existing fleet of 53 vehicles, the service operates 7 days a week, covers 1,400 square miles, and provides an average of 800 one-way trips per weekday. Use of Contractors for ADA Paratransit DART service is operated by Senior Services of Snohomish County (SSSC), a private non-profit organization, through a contract with Community Transit since 1981. Although the contractor manages all day-to-day operations, the hardware and software, including an automated client file, reservation, mapping, scheduling, and dispatch system, is provided by Community Transit. Vehicles are also provided by Commu- nity Transit, but maintenance is provided by the contractor. SSSC manages the day-to-day operations of the service. The organization’s responsibilities include customer eligibility screening, customer service, scheduling, reservations, routing, dispatching, supervision, fare collection, and operations. Procurement/Contractual Provisions Community Transit places a high value on service quality when selecting contractors, recognizing operator pay as an indicator of that quality. The agency’s Contracted Services Coordinator stated the following: We make it clear in our RFPs that we expect experienced, trained operators; by setting the bar high, we have a better chance of securing such a workforce through the contract. While the expectation of paying operators well and valuing employment longevity is not explicitly indicated in the RFPs, it acts as a strong determinant in selecting winning proposals. For example, Community Transit’s most recent contractor was chosen largely because its proposal touted high wages for operators and extremely low turnover. Community Transit’s RFPs also include a detailed set of serv- ice standards, incentives, and liquidated damages, although Community Transit reported that the incentives do not have a significant impact on service. One of the liquidated dam- ages provisions relates to run coverage. The following is an example: Contract incentives and/or penalties related to maintaining an adequate vehicle operator workforce or covering all runs assigned The Contractor shall provide adequate staffing to ensure that staff or manpower shortages are compensated for with qualified personnel in a manner which does not detract from staffing lev- els in other areas of this project. The RFP includes the following language regarding penal- ties for poor performance by the Contractor: One hundred dollars ($100.00) for each occasion that the Contractor does not have the number of vehicles available for revenue service as specified by Community Transit in operating service. The Contractor Perspective The General Manager of Senior Services of Snohomish County stated that the high expectations for experienced operators and high wages are “definitely a draw” when recruit- ing operators. He explained that before hiring operators, they go through intensive training, and 60% “make it out.” The agency looks for vehicle operators that have the following: “good driving records, good people skills, and want to assist people. Those are the ones that stick around a long time.” The agency reported the turnover rate for operators is about 20–30%, depending on the month. The General Manager reported that Senior Services meets the goals set forth by Community Transit. The 91% on-time performance standards are always met, and the general man- ager stated that they “never miss a trip.” He explained: “We meet all goals. We don’t turn anybody down. We really don’t have financial disincentives happen.” Although he is aware that the financial disincentives exist in the contract, the main motivation for Senior Services is to be a good service provider. Reported Results Turnover has not been a problem for Community Transit since they began contracting with Senior Services of Sno- homish County, the contractor who proposed to provide high operator wage rates and to maximize operator retention to the extent possible. It was noted that Senior Services only loses one or two operators a month out of about 70 operators. Community Transit believes that the combination of RFP language requiring a stable, experienced operator workforce and the contractor’s natural desire to treat operators well and provide them with sufficient training has contributed to a paratransit system that provides high quality, on-time ser- vice, and satisfied and experienced operators. Access Services, Inc. (ASI), Los Angeles, CA Access Services (ASI) is a local public agency organized as a public benefit corporation that operates ADA complemen- tary paratransit service. ADA paratransit service is provided for the Los Angeles County Metropolitan Transit Authority (LACMTA) and 40 other fixed-route transit operators in Los Angeles County pursuant to the Los Angeles County Coordi- nated Paratransit Plan. In addition to operating the ADA 113

complementary paratransit service, known as Access Para- transit, ASI acts as the Los Angeles County Consolidated Transportation Service Agency (CTSA). It is governed by a nine-member board appointed by the Los Angeles County municipal fixed-route operators, the Los Angeles County local fixed-route operators, the City of Los Angeles, the County of Los Angeles, the Transportation Corridor Representatives of the Los Angeles branch of the League of Cities, the Los Angeles County Commission on Disabilities, and the Coalition of Independent Living Centers. Use of Contractors for ADA Paratransit Service is provided by six principal contractors in six regions as shown in Table 10-2. Requests for service are auto- matically routed to the appropriate carrier based on the cus- tomer’s telephone number. Each of the contractors provides turn-key services in their region. Each provider except for MVT in the Southern region is responsible for taking reservations, verifying customer eli- gibility, scheduling rides onto vehicles, and providing service using ASI-certified vehicles and operators. GPI accepts all reservations for the West/Central and Southern regions and passes on a portion of the reservations for the Southern region to MVT. Each provider is responsible for all trips originating in its region regardless of whether the destination is in the region or another one within the Los Angeles Basin. Trips between the Basin, Santa Clarita, and the Antelope Valley require a transfer. Service is provided using a mix of ASI-owned vehicles, provider-owned vehicles dedicated to Access service, and taxi- cabs certified for Access Paratransit service. ASI manages the system, providing contractor oversight and monitoring, and also directly provides customer service functions, fleet management functions (for its own vehicles), community outreach functions, and all administrative and planning functions. Procurement/Contractual Provisions Access Services reported in the survey that it had moderate success with the inclusion of “living wage” and benefit infor- mation in the RFP. Evaluation criteria are used to evaluate proposals, and points are earned on a sliding scale. Criteria are based on the following: • Comparability of pay (to other carriers); • Quality of the heath care plan (e.g., the percentage split of premiums between the company and the operator); • Inclusion of medical, dental and vision benefits versus medical only • Family package; • Number of vacation, sick and PTO days; • Educational reimbursement; and • 401K/retirement plan. In its paratransit solicitations, Access Services supplies wage information by position for the current contractor; this includes the starting hourly rate, the top hourly rate, and any qualifying notes, such as whether there are annual or merit increases. The two most relevant provisions in the solicitations are as follows: Expectations for Operator Wages / Retention The selected Proposed shall establish and maintain an employee pay and benefit structure, which will serve to attract and retain high-quality employees for all positions required to successfully perform the work. Proposer must submit rates and graduated rate increases along with timelines for the increases. Proposal Evaluation Criteria Access Services will substantially downgrade proposals that do not incorporate appropriate wage and benefit packages that will facilitate successful recruitment and retention of qualified employees. Access Services will also downgrade proposals that do not provide for reasonable medical benefits for all full time employees. Proposer should carefully consider adequate and comparable rates of compensation, public sector and private sec- tor, which exist for similar positions within Los Angeles County. Proposals are evaluated with both qualitative and quanti- tative measures. The quantitative measures are as follows: Quality of Technical Approach 30% Paratransit Operating Experience 20% Cost/Price Proposal 20% Employee Pay and Benefits 15% Qualifications and Availability of Proposed Staff 15% 114 Region Contact Providers San Fernando Valley (Northern) MV Transportation (MVT) Eastern San Gabriel Transit (SGT) West/Central Global Paratransit Inc. (GPI) Southern Global Paratransit Inc., and MV Transportation Santa Clarita Santa Clarita Transit Authority Antelope Valley Antelope Valley Transit Authority (AVTA) Table 10-2. ASI service regions and contractors.

The Contractor Perspective MV Transportation’s General Manager reported that wage scales have had a positive impact on vehicle operator retention, but he said that because of the competitiveness of the procure- ment process, the company is unable to increase hourly wages. However, operator retention is encouraged through increasing wage scales at 6 month and yearly increments. In addition, the company offers incentive programs for retention, such as a financial retention bonus, paid at multiple stages up to an operator’s first 6 months of work. He also reported that the company’s employee referral program has been extremely successful. If an operator refers a new applicant, and if the new hire works for at least 90 days, both receive bonuses. The general manager said that this program also “encourages the experienced operators to be mentors for the new hire referrals.” Despite retention programs, there is about a 45% turnover rate. As far as the evaluation criteria, the general manager sug- gested that “it is a good concept, although the current con- tract was renegotiated due to the current budget crisis.” Reported Results ASI’s Executive Director noted that ASI purposely did not quote a minimum wage rate in their RFP because in Califor- nia, that would constitute ASI being an “implied” employer. However, in the past, ASI has encouraged contractors to set a vehicle operator wage above the minimum ($8.50), but in many cases, the wages came in at the figure. She said that ASI is exploring how to actually set the wage without becoming the implied employer of the operators. The Executive Director also was quick to point out though that operator wage rates alone do not tell the entire story, reporting that the contractor with highest operator wage rates in the system was one of the poorest performers, and the con- tractor with the lowest wage rates was one of their best per- formers. In the survey, ASI noted that many contractors are still focused on submitting the “lowest bid” since operator wages make up the majority of the overall cost. She also men- tioned that some of her contractors include a benefits pack- age that provides English-as-a-second-language benefits, an operator recognition program, and “stepping stone” career programs and internships that pave the way for operators to advance to senior/management positions. Madison Metro Transit, Madison, WI Madison Metro Transit is the municipal transit provider for the city of Madison, WI, covering an area of 60 square miles. With more than 450 full-time employees, Madison Metro Transit serves an average of over 54,000 daily passenger trips during the school year. The service has 56 fixed-routes and operates a fleet of 204 buses. Its ADA paratransit service, Metro Plus, provides nearly 300,000 annual trips to 1,774 clients. Metro also operates Group Access Service (GAS) for Madison, Middleton, and Monona adults who live in their own homes and apartments, are over 60 years old, and have a physical or sensory disability. GAS is a scheduled, routed, group service to meal sites, farmers’ markets, pharmacies, libraries, and grocery stores. Use of Contractors for ADA Paratransit Beginning in 2009, nearly a quarter of Metro Transit’s paratransit operations are in-house, with the remainder of the work contracted to Transit Solutions, Badger Cab Com- pany, and Badger Bus. All customers call Metro Transit, and transit agency staff either serves the customer themselves or delegates the work to one of the three contractors. Transit Solutions operates about 20% of the ADA service on week- days only, with no weekends or holidays; Badger Bus handles about 30% of the requests on weekdays, nights, and week- ends; and Badger Cab provides ambulatory services and takes over leftover ADA paratransit runs, about 23%. Procurement/Contractual Provisions There is a municipal and county-wide living wage ordi- nance that is articulated in Madison Metro’s RFPs. It states: LIVING WAGE (Applicable to contracts exceeding $5,000). CONTRACTOR agrees to pay all employees employed by CONTRACTOR in the performance of this contract, whether on a full-time or part-time basis, a base wage of not less than CITY minimum hourly wage as required by Section 4.20, Madison General Ordinances. One of the contractors, Transit Solutions, adds to this liv- able wage by providing benefits and an incentive plan that pays operators for safety and attendance. Madison Metro has also established standards in its con- tracts with penalties on a per-trip basis. Since 2006, this sys- tem of collecting performance data from contractors and then generating a percentage of compliance has been used to calculate this per-trip penalty fee: It is the responsibility of CONTRACTOR to make every effort to comply with all service standards established by CITY. CITY has established a service standard of passenger pick up no later than twenty (20) minutes after the scheduled time. For each instance in which a passenger is picked up outside of this service standard, the following reimbursement will be applied: On-Time Performance Reimbursement 94% On-Time 100% of the reimbursement rate 90–93% On-Time 98% of the reimbursement rate Less than 90% On-Time 90% the reimbursement rate 115

While the CITY pays the lesser of the cost of the ride or $3.00 for each “no show” a passenger has when service is provided by the CONTRACTOR on a per trip basis, this cost must be absorbed by the contractor if they are over twenty minutes late. The Contractor Perspective The owner of Transit Solutions commented that the “liv- ing wage” outlined in the contract is “great because it gives people a higher starting wage.” Transit Solutions also has benefits for employees like health insurance, retirement pack- ages, and paid holidays, which all help to maintain a steady workforce. In addition to the incentive plan in the contract, the owner noted that Transit Solutions has an incentive plan for vehicle operators that: “pays people for safety and atten- dance . . . all of those things play into recruitment and reten- tion.” The company uses the financial incentives in the con- tract with Metro Transit in a similar fashion with its other employees. The owner stated, “Overall, I think the system they [Metro Transit] have is reasonable and it works.” Reported Results Contractors are almost always within the 94% to 100% on- time rate. Madison Metro Transit’s Paratransit Program Man- ager reported that rarely, if ever, is the 10% reduction penalty enacted. Contractors work hard to meet the 94% compliance rate and have found that the only time they fall short is dur- ing bad weather (in which case the penalty is waived by the City). In March 2009, Transit Solutions achieved a 98% on- time performance rate. It was noted that paying a living wage has definitely helped to retain vehicle operators. The Paratransit Program Manager said she believes this higher pay has also contributed to higher quality driving and service. She stated, “Operators stay when there is better pay, and they drive better, too.” Vehicle operator turnover at Transit Solutions is extremely low. In 11 years of business, over half of Transit Solutions’ orig- inal operators remain. The owner attributes this to a combi- nation of good wages, benefits, and hands-on management; he and his partner are present and available each day, and they make an effort to treat people well and with respect. They even maintain a special account for employee pay advances which are paid back via paycheck deduction at no interest. The owner stated: “We do things to help our work- ers and make it easier and more enjoyable to work here. And it really works.” Orange County Transportation Authority (OCTA), Orange County, CA The Orange County Transportation Authority (OCTA) serves Orange County through bus, commuter rail, Express Lanes, and paratransit service. OCTA operates approximately 80 bus routes, covering every city in Orange County and sev- eral cities in Los Angeles County. OCTA also operates express service to Los Angeles and to San Bernardino and Riverside counties. OCTA’s ADA paratransit service is called ACCESS. Most recently, in 2007, OCTA initiated a Vanpool Program to provide assistance to commuters who work in Orange County and live in neighboring counties. Use of Contractors for ADA Paratransit Until July 2009, OCTA’s fixed-route, express bus, and ADA paratransit service were operated by Veolia Transporta- tion. After July 2009, Veolia Transportation began running only the ADA paratransit service, ACCESS, utilizing a fleet of 350 vehicles. Veolia provides a turn-key operation, providing all day-to-day operations and vehicle maintenance on OCTA provided vehicles. OCTA has a managerial role and has close oversight on all service provided by Veolia. Procurement/Contractual Provisions In the survey, OCTA reported that it had significant suc- cess with specifying a minimum or “living wage” rate in its procurement and contract documents, as well as including language regarding an experienced workforce and incentives or penalties in the contract related to maintaining an ade- quate vehicle operator workforce. OCTA also reported that they include strict and specific evaluation criteria in the RFP. OCTA includes the following language to indicate its expec- tations for vehicle operator wages/retention: AUTHORITY recognizes the expense and negative effect of employee turnover. Therefore, the CONTRACTOR must demon- strate they have an acceptable recruitment and hiring program that is intended to minimize employee turnover and retain a high quality work force. Several service performance standards, incentive payments, and penalties are also included, as shown in the Table 10-3. The Contractor Perspective The Project Director for Veolia reported a low turnover rate of 7%. He reported that there is a dedicated commitment to training which has paid off, as evidenced by the high retention rate. He said that with better training the company sees better results. He noted that another reason for the high retention is the benefits package provided to employees, including good health care, a living wage, and help with flexibility on travel to work, which is an issue in and around the Los Angeles area. The Project Director reported that the incentives outlined in the scope of work are hard to achieve. He said: “In 36 months, 116

we’ve received only one performance incentive. They are chal- lenging incentives to meet.” He explained that the complaint standard is the toughest and perhaps the strongest in the coun- try, so the company has never met it. Veolia is striving to meet it and is establishing a new program with increased training for better results. Reported Results OCTA’s Field Administrator commented that the contrac- tor performs well according to obligations outlined in the scope of work. He reports that good communication between the contractor and the agency is the best way to have a shared understanding of expectations, since language in a contract can be tricky and interpreted in more than one way. He said that since April 2007, Veolia has maintained an on-time per- formance level average of 93%. Palm Tran CONNECTION, Lake Worth, FL Palm Tran, Palm Beach County’s public transportation service, provides fixed-route public bus transportation and coordinated paratransit service. Fixed-route bus service is provided on over 30 routes, serving nearly all destinations in the county. Buses generally operate weekdays with 30-minute headways during peak rush hours and 60-minute headways during mid-day and on the weekends. Palm Tran CONNECTION is the county’s shared ride, door- to-door transportation specialized service. CONNECTION schedules all trips, prepares vehicle manifests, handles cus- tomer concerns, determines eligibility, and monitors the per- formance of transportation providers. Veolia runs a turn-key operation, performing all ADA paratransit functions. Use of Contractors for ADA Paratransit Palm Tran contracts with MV Transportation, Palm Beach Metro Transportation, and Two Wheels Transportation. The contractors operate 190 vans, providing door-to-door service for senior citizens, persons with disabilities, and persons with low-income. The service provides an average of 4,025 sched- uled passenger trips each weekday. Veolia runs a turn-key operation and performs all ADA paratransit functions. Procurement/Contractual Provisions Palm Tran includes language in RFPs indicating that a stable, experienced vehicle operator workforce is expected. Under- standing that a great deal of operator retention is determined by compensation, Palm Tran gives preference to respondents with the highest operator pay rates. Palm Tran also includes a specific liquidated damage fee in contracts to offset the cost of uncovered runs. While this fee has provided an effective incentive for contractors to cover runs, there have not been many problems, and the fee penalty has been scarcely implemented. The Contractor Perspective The General Manager of MV Transportation believes that factors such as benefits, work atmosphere, and communica- tion are key ingredients in maintaining a stable and experi- enced workforce. MV Transportation takes extra care in mak- ing the company an enjoyable place to work by providing full-benefits, substantial vacation time, and an open door pol- icy with all managers. The general manager reported that the company no longer has to spend significant time and money 117 Category Standard Incentive Penalty ACCESS On Time Performance 95% or above $5,000 for each percentage point above 96% on time $5,000 for each percentage point below 94% on time Service Delivery Failure All qualified requests must be served. None $1,000 per occurrence Call Center Hold Time Average of 90 seconds or less None $1,000 deduction if monthly average exceeds 90 seconds Call Center Valid Complaints No more than 1 valid complaint per 1,000 passengers each month None $100 for each valid complaint over 1 per 1,000 passengers Accident Report Report all within 24 hours, verbal and written. None $5,000 per accident not reported. Table 10-3. OCTA service standards, incentives and penalties.

recruiting employees because the pay is higher than other companies. MV Transportation increased hourly pay for the Palm Tran contract, and the general manager reported that this has helped to retain operators. The general manager also reported that she aims to main- tain a stable operator workforce and works towards adhering to contract requirements. She uses the liquidated damages clauses set forth in contracts as incentives to provide good service. Reported Results Palm Tran CONNECTION’s Fiscal Analyst reported that, generally, contractors perform well and meet their contractual requirements. There are rarely, if ever, any uncovered runs. Turnover has become less of a problem not only because of the RFP provisions, but as unemployment rates have increased, operators tend to hold onto to their jobs for longer periods of time. City of Phoenix Public Transit Department, Phoenix, AZ The City of Phoenix Public Transit Department is responsi- ble for the overall supervision of the City of Phoenix Transit System. The City manages local buses, Phoenix Dial-a-Ride paratransit, Reserve-a-Ride senior service, RAPID and Express commuter services, and several neighborhood circulators. The City’s paratransit service is called Dial-a-Ride. The service operates seven days a week in almost all areas within Phoenix city limits. Dial-A-Ride serves individuals who are ADA paratransit eligible as well as seniors. ADA paratransit customers are encouraged to call at least one day in advance for service; where possible, same day demand service is also available after reservation requests have been scheduled. The City also manages Reserve-a-Ride, a specialized, door- to-door transportation service for senior citizens over 60 years old and certified persons with disabilities. Reserve-a-Ride pro- vides transportation to senior centers, medical appointments, social service agencies, and shopping. The primary responsi- bility of the service is to provide transportation to and from senior centers, and other trip requests are accommodated wher- ever possible. These two services, Dial-a-Ride and Reserve-a- Ride, are operated by the same contractor with the same fleet of vehicles. Use of Contractors for ADA Paratransit MV Transportation has been the City’s paratransit contrac- tor since 2001. MV Transportation manages all day-to-day operations, including maintenance on over 100 vehicles and scheduling service for both advance and same-day service requests. Out of the 300 or so MV Transportation employees, about 215 of them are vehicle operators. Procurement/Contractual Provisions In the survey, Phoenix reported that it had moderate success when specifying that a stable, experienced vehicle operator workforce was expected, and also moderate success when including a “livable wage” requirement in its procurement and contract documents. While there is no living wage ordinance in Phoenix, the City understands that a livable wage scale is sig- nificant for job retention and stability. The City’s RFP requests a detailed plan with specific strate- gies for maintaining a stable workforce. The City encourages proposers to be creative in their approach to operator reten- tion, stating that preference will be given to proposers who can successfully demonstrate to City their ability to retain quality operators. In addition to requiring the proposer to outline hir- ing, training, and retraining programs for operators, Section VII of the RFP asks proposers to respond to the following: Discuss the PROPOSER’S philosophy on providing a “livable wage” given the current state of the economy and how the pro- posed employee wage and benefit package and other innovative programs ensure that they meet that standard. Describe in detail the methods to be taken in order to attract and retain the appropriate staffing levels. Include any incentive and/or merit programs to award outstanding employees. Describe in detail the type and level of employment benefits provided or available to employees addressing vacation, sick and other leaves, health and welfare benefits, wage and salary classi- fications and progressions, and employer contributions for all programs for all job categories. When evaluating RFP responses, a points system is utilized. The Director of Transportation Contract Services explained, “Our approach is that we want to make sure the company we hire is going to fulfill our needs as far as service—we take an approach of service over price.” The evaluation criteria out- lined in the RFP are the following: Qualifications 50 points Professional References 50 points Management 150 points Maintenance and Operations Experience 100 points Understanding of Scope 400 points Price 250 points The RFP also provides a system of incentives and sanctions to reward exemplary performance and ensure adherence to performance standards, but the survey indicated that these incentives and/or penalties did not have even a moderate impact on contractor performance. 118

The Contractor Perspective The General Manager for MV Transportation reported that the success it has had working with the City of Phoenix is due to a “successful, true partnership” between the two organiza- tions. He gave credit for the positive working relationship to the City’s understanding of the operation, saying: “[The Director of Transportation Contract Services] knows how our system works—he understands the nuts and the bolts.” The current average wage for an operator is $14.45, which is adequate according to the terms outlined in the RFP. In addition to a reasonable wage, though, the general manager said it is important to look for individuals who are customer- service oriented. He also indicated that a good work environ- ment and other non-monetary rewards have measurable pos- itive effects on turnover. He noted that these methods were helpful in MV Transportation’s response to the City’s RFP requirement of a description of “methods to be taken in order to attract and retain” employees. Annually, MV Transporta- tion in Phoenix sees about a 21% turnover rate. It was noted that 83 of MV’s 180–200 paratransit vehicle operators have over 8 years of experience. Both the City staff and MV General Manager reported that the financial incentives or penalties were not a motivator to provide good service. MV Transportation does adhere to goals outlined by the City, and they have “monitors all over the place,” indicating current levels of on-time performance, aver- age hold time for a customer on the phone, etc. This keeps all personnel informed of the current situation and helps to strive for the best customer service possible. Regardless of whether the motivation for good service is the contract with the city or just good business practice, MV Transportation receives more financial rewards than penalties. The MV General Manager also commented that RFPs and contracts should be specific: “The more specific the agency can be when putting the proposal together and creating the vision that they want, then the end result will be more successful.” Reported Results The contractor for paratransit service has a relatively low turnover rate for a private contracted operation (reported to be 21%). A third of operators have been employed with the contractor for over 8 years. City of Phoenix transportation staff also reported that “this has improved service and produc- tivity by volumes.” The Director of Transportation Contract Services commented, “It definitely improves productivity and service quality when you treat your employees well.” On the books, the City and contractor have yet to experience a day with high numbers of closed runs. Budgeted hours from the most recent contract indicate that the contractor is always able to meet allotted hours, whereas before contractors in pre- vious periods fell short of the requirements due to lack of oper- ators, which caused the City to over-budget. For the past five or so years, the City has been able to maintain its budget pre- cisely. Important to note, immediately prior to the most recent contract with MV Transportation, the City approved a sales tax measure that allocated more money to transit. In just a 2-year period, the City was able to double its number of service hours provided, and the contractor was able to provide an adequate workforce to meet this new induced demand. According to City staff, the greatest challenge when nego- tiating contracts is trying to convince bidders to change their mindset or approach when developing their proposals. He said that most bidders are accustomed to winning a contract based almost entirely on price rather than service. He noted that in the Phoenix process, when reviewing proposals, the price for each bidder was not revealed to the evaluation com- mittee. As a result, the committee was only able to evaluate based on the merits of the proposals. A City staffer expressed: “I feel that we had a successful procurement in that the suc- cessful proposer is still with us and doing a very good job, which was our objective to have them competing on the qual- ity of service, rather than the price. By the way, the successful proposer was not the lowest bidder.” San Diego Metropolitan Transit System, San Diego, CA San Diego Metropolitan Transit System (MTS) is the public transit agency that provides bus and rail services directly or by contract with public or private operators. MTS manages the scheduling, frequency of service, and hours of operation for its existing services covering approximately 570 miles in and around San Diego. Existing passenger services include 82 bus routes, three trolley lines, and ADA paratransit service that together serve over 3 million residents. ADA paratransit service is called MTS Access. Use of Contractors for ADA Paratransit First Transit is the contractor for MTS Access. The contrac- tor is 100% turn-key and handles all operations functions. Vehicles are owned by MTS. Procurement/Contractual Provisions In the survey, MTS reported that it had moderate success including (1) language that a stable, experienced operator workforce was expected; (2) requirements for proposers to provide wage scales, and (3) specific incentives and/or penal- ties for uncovered runs. RFPs include wage standards, which are set to increase or decrease according to the market, thus creating a level playing 119

field for new bidders which allows operators to keep up with the cost of living and retain employees. New contractors must maintain existing operators at current seniority levels. MTS mandates in its contracts that a certain percentage of each invoice is allocated to operators’ benefits. For example, for fiscal year 2011, the minimum wage is $10.14/hour for train- ing, $10.71/hour after training, and $11.27/hour base wage after a probationary period. The contractor is required to con- tribute 5%, or $2.10, from the base wage towards employee benefits. There is also a requirement that all operators who work more than 20 hours per week should have full medical coverage. MTS provides a 10% preference to contractors who are able to prove in proposals that they are able to retain their operator workforce and who agree to retain their current staff upon contract. The evaluation criteria are as follows: Corporate Capacity/Qualifications 10 points of the Firm Corporate Experience 30 points Key Personnel 50 points Facility Plan 20 points Safety and Training Plan 10 points Start-up Plan 20 points Customer Services 20 points Cost and Price 70 points 10% Bidding Preference 23 points MTS also sets performance standards, financial incentives, and liquid damages. These are shown in the Table 10-4. The Contractor Perspective The District Manager at First Transit reported that the livable wages clause included in the RFP helped to drive the company to meet the high standards for wages. The responsible wage requirement “helps maintain a level of wages that are competi- tive” and, in turn, helps to prevent a high turnover rate. The District Manager also commented on the incentives and disincentives included in the RFP. “We have met the highest level of incentive thresholds for productivity for the past four years,” he explains. He said that the incentives and disincen- tives were set “at a level where the dollar level wasn’t significant enough.” He noted that instead of financial motivation, cus- tomer service and good business practice are instead drivers for service. The District Manager noted that the responsible wage requirement only applies to vehicle operators that are not cov- ered by a collective bargaining agreement. First Transit oper- ates under labor contracts now and it is expected that when the company responds to the June 2009 RFP, the responsible wage requirement will not be applicable. Reported Results Despite the focus in the procurement on workforce stability, it was reported that turnover has continued to be a problem over the past few years running at “upwards of 100%” according to the First Transit District manager. With the economic down- turn, the turnover rate has decreased and has been running at about 40% for the past year. San Mateo County Transit District (SamTrans), San Mateo, CA The San Mateo County Transit District is the administrative body for the principal public transit and transportation pro- grams in San Mateo County: SamTrans bus service, Redi- Wheels paratransit service, Caltrain commuter rail, and the 120 Performance Measure Incentive LiquidatedDamages Contractor shall achieve a monthly no- show rate of under 5% $2,000 per each month no-show rate is below 5% Any month in which no-shows are greater than 7.5% may carry a damage of $1,000, and $2,000 in which no- shows are greater than 10% Contractor shall ensure that all trips arrive within the established MTS On-Time Performance Window $5,000 per month may be paid Contractor for each month that 90% or more of trips arrive in the MTS established On-Time Window none Contractor shall ensure that hold times don’t exceed an average of two (2) minutes None $5,000 for each month where average hold times exceed two minutes Table 10-4. MTS performance standards, incentives, and liquidated damages.

San Mateo County Transportation Authority. Caltrain and the Transportation Authority have contracted with the District to serve as their managing agency, under the direction of their appointed boards. The SamTrans fixed-route bus system con- sists of 54 routes (44 operated by the District and 10 contracted to MV Transportation), which carry nearly 50,000 passengers on an average weekday. The District’s paratransit service, Redi- Wheels, transports approximately 1,000 customers every day on 83 buses, vans, and sedans, with some additional taxi ser- vice. RediCoast operates nine vehicles on the coastside and provides about 100 rides each day. Use of Contractors for ADA Paratransit Redi-Wheels, RediCoast, and a portion of fixed-route service are contracted to MV Transportation. For Redi-Wheels service, SamTrans performs ADA eligibility and marketing and owns, maintains, and fuels 59 vehicles. MV Transportation manages the remaining day-to-day operations. MV Transportation provides 15 vehicles, all sedans. MV has about 110 vehicle operators. Procurement/Contractual Provisions In the survey, SamTrans reported that it had significant suc- cess with specifying a minimum wage rate and incentives and disincentives relating to an adequate workforce in its procure- ment and contracting documents. SamTrans emphasizes the importance of an experienced workforce in both the pre-bid meeting and in the RFP, stating specifically that operators must be fairly compensated with competitive wages and ben- efits. While SamTrans legally cannot require a specific pay scale, the transit district consistently places strong emphasis on a stable workforce, and staff monitors the contractor to ensure a competitive wage is provided. The most recent RFP contained a specific section on Para- transit Operator Longevity, which is closely monitored by SamTrans throughout the duration of the contract: It is of paramount importance to the District and in the best interest of its customers that Paratransit Operators are not only properly trained, but gain hands-on experience in their craft. It has been the District’s experience that a high turnover rate among Paratransit Operators reduces overall service quality through lack of efficiency and familiarity with the areas in which they operate. In order to indicate a high level of commitment, a Contractor must encourage and promote longevity of its Paratransit Opera- tors. Proposers are required to complete and submit Appendix D, “Staffing Plan Summary” and Appendix E, “Wage and Benefits Summary,” and disclose a plan to accomplish this end with its Proposal. Proposers should disclose information such as award programs and other incentives offered to their Paratransit. There is also a monetary penalty if the contractor is not able to meet the daily demand or maintain at least a 90% on- time performance level. If the contractor fails to provide an adequate number of vehicle operators to meet the required level of service as defined in the contract, a $1,500 fine is insti- tuted. The contract also clearly states that no trips shall be missed or dropped due to unavailability of operators, and the contractor is fined $500 for each missed trip. The Contractor Perspective The General Manager for MV Transportation reported that “We have a low turnover rate at Redi-Wheels, mainly because we have a very good pay rate and fringe benefits.” Employees receive 100% full health benefits, paid by MV Transportation, which equates to about $10 per hour for health benefits on top of their hourly wage. As a result, the general manager esti- mated that the annual turnover rate is about 10% which he felt was “incredible in our industry.” He also comments on the current economic climate, which has dramatically changed operator recruitment: “Before, it was difficult to find opera- tors in the Bay area because there is so much competition for jobs in other sectors. Now, I’m finding 10–20 people a month looking for employment.” As for financial incentives outlined in the contract, the gen- eral manager reported that bonuses and disincentives in the contract have worked “substantially.” He said that four of the standards, productivity, on-time performance, accidents/ safety, and wait time on the phone, have huge bonuses and repercussions for MV Transportation if the company does not meet the standards. He reported that these financial repercus- sions influence his business decisions, saying “It is cheaper for me to add a person to the reservations taking function than to exceed the standards for wait time on the phone.” Currently, MV Transportation meets Redi-Wheels’ 90% on-time per- formance standard. The general manager said that the com- pany has been at this 90% level for a long time, and he is trying to figure out how to improve it, but so far has been unsuccess- ful. As for productivity, he reported that the service operated at about 1.5 to 1.6 trips per revenue-hour. Reported Results The SamTrans Accessibility Coordinator reported the paratransit contractor experiences extremely low turnover rates, especially in comparison to others in the region. She noted that by paying just $1 to $2 more per hour, operator turnover was reduced significantly, making a clear case that paying a higher wage dramatically reduces turnover. She also noted that she believes the more experienced operators tend to be safer and more efficient, which is both a financial and a community benefit. It was noted that while the monetary penalties have acted as an incentive for on-time performance, they have yet to be leveraged with the current contractor, who has consistently been able to meet the 90% on-time performance rate. 121

SamTrans also recognizes good performance by individu- als and reinforces good behavior by making both the transit district and contractor employees eligible for the “I Made a Difference” award. The award, generally an honor rather than a monetary award, is usually presented by a supervisor to an operator while mid-route. The award has created a good atmosphere and appreciation in the workplace, which was felt by managers to contribute to maintaining a stable vehicle operator workforce. King County Metro Transit (Metro), Seattle/King County, WA King County Metro Transit (Metro) is a public transit agency serving more than 1.7 million residents in King County, Washington. Metro operates a fleet of about 1,300 vehicles, including standard and articulated coaches, electric trolleys, dual-powered buses and hybrid diesel-electric buses that serve an annual ridership of 100 million in a 2,134 square mile area. In addition, Metro operates the largest publicly owned vanpool program in the country, with more than 600 vans providing transportation to 5,000 people every day. Metro also manages Access paratransit service, its ADA paratransit service. The program provides next-day, shared rides within three-quarters of a mile on either side of non- commuter fixed-route bus service during the hours and days of operation those routes are in service. In 2007, Access ser- vice provided over 1.1 million rides with a fleet of 300 vans. Use of Contractors for ADA Paratransit Metro contracts its Access paratransit service call center to First Transit, who manages scheduling, reservations, and dis- patching. Two other private companies are then under con- tract to Metro to provide vehicle operation and maintenance. The service provider contractors are Veolia Transportation, which operates about 70% of the runs, and Solid Ground, a local non-profit organization that operates about 30% of the service. Procurement/Contractual Provisions In the survey, Metro reported that it had moderate suc- cess with including language in the solicitation indicating that a stable, experienced vehicle operator workforce was expected. Metro Transit also noted a specific points system used in the evaluation of prospective contractor proposals. The following language is included in the 5-year service provider contracts: The Contractor shall ensure that sufficient staff are hired and retained to meet this Contract’s service requirements. The County reserves the right to reduce the Contractor’s monthly invoice appropriately for any management or supervisory position such as Project, Operations, Information Service or Maintenance Manager, left vacant for more than sixty (60) Days. The Contractor’s provision of qualified, capable and experi- enced personnel is essential to the performance of its contractual obligations herein. As such, failure to provide suitable personnel consistent with the County’s contractual expectations as set forth herein shall be deemed a material breach of contract and subjects the Contract to immediate termination at the County’s option. The Contractor shall ensure that its employees are qualified, capable and suitable to perform the requirements of this Con- tract and the County reserves the right to provide input to the Contractor in determining the suitability of any employee to con- tinue performing the work pursuant to this Contract. The Con- tractor shall provide all pertinent employee records regarding incidents/accidents, passenger complaints, etc., to King County as soon as possible upon request. The County recognizes that the strength of its transportation program is built upon the strength of its operators. Proposers are asked to consider how they will hire and retain an excellent workforce. Metro assigns points when evaluating RFPs to best analyze the proposed services. Typically, vehicle operator recruitment and retention comprise 18–20% of the total score. Table 10-5, 122 Criteria Points Percent of Total Training program 25 2.5% Plan to recruit, train staff and perform the work 50 5.0% Evaluation of proposed team and key persons 45 4.5% Proven ability to collaborate with contractor’s staff 20 2.0% Plan to transition staff who are currently employed with another operator so that service is not disrupted 75 7.5% Record keeping and retention plan 25 2.5% Customer service plan 75 7.5% Pricing 200 20.0% Other (specifics in contract) 515 51.5% Table 10-5. King County Metro proposal evaluation criteria and points.

adapted from a recent RFP, shows the evaluation criteria and points. Metro also includes a liquidated damage for runs that are dropped due to a lack of vehicles or operators. The relevant section reads as follows: The Contractor acknowledges that the provision of services pursuant to this Contract entails providing specialized, public transportation services, and that it is essential that safe, reliable, and efficient service is provided at all times. Liquidated damages may be assessed, at the option of the County, in the circum- stances detailed in the table set forth below. Reported Results Metro indicated that it is difficult to determine the impacts of these procurement strategies at this point because the con- tracts have just been awarded. A previous contract contained only minimum wage standards, which seemed to raise issues as several of the contract providers have had union repre- sented operators. In addition to increasing wage require- ments in the latest RFP, Metro removed the incentives related to run coverage that were included in past contracts. They indicated that the incentives in prior contracts related to run coverage didn’t seem to affect contractor behavior, so they replaced them this time around with liquidated damages. It was noted that vehicle operator turnover is a significant problem for King County. A commonly cited issue in retain- ing paratransit operators is that they often leave the industry for higher paying industrial jobs since they are required to also maintain commercial drivers’ licenses. Metro is considering eliminating the CDL requirement, but still requiring the train- ing to address the same content as in the CDL training. It was noted that operator retention has been better at Solid Ground. Metro indicated that this appeared to be partly due to the more extensive fringe benefits provided by this contractor. Metro managers noted that they have recently established a new bid model with flexible start times which can vary within 1–2 hours per day. Operators will receive notification the day prior to service as to when they will begin work the following day. More and more operators have been sent home before a shift’s end when late cancellations have allowed routes to be closed early and rides to be moved. 123 Item Requirement Liquidated Damage - Cost 1 Route dropped or reassigned due to unavailable vehicle or operator Perform all routes VSHs as assigned $1.5 times cost for replacement service per VSH

TRB’s Transit Cooperative Research Program (TCRP) Report 142: Vehicle Operator Recruitment, Retention, and Performance in ADA Complementary Paratransit Operations provides guidance for understanding the relationships that influence and enhance operator recruitment, retention, and performance in Americans with Disabilities Act (ADA) complementary paratransit services.

Appendixes to TCRP Report 142 were published electronically as TCRP Web-Only Document 50 : Survey Instrument, Productivity Charts, and Interview Protocol for Case Studies for TCRP Report 142.

READ FREE ONLINE

Welcome to OpenBook!

You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

Do you want to take a quick tour of the OpenBook's features?

Show this book's table of contents , where you can jump to any chapter by name.

...or use these buttons to go back to the previous chapter or skip to the next one.

Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

To search the entire text of this book, type in your search term here and press Enter .

Share a link to this book page on your preferred social network or via email.

View our suggested citation for this chapter.

Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

Get Email Updates

Do you enjoy reading reports from the Academies online for free ? Sign up for email notifications and we'll let you know about new publications in your areas of interest when they're released.

Case Study: Reducing Purchase Order Cycle Time, Part 1

Published: March 18, 2019 by Andy Atkins

This is a Green Belt project the author led at a large financial data services company. The project was designed to reduce the overall cycle time for procurement to issue a fully approved requisition into a purchase order dispatched to the supplier. Following the Lean Six Sigma (LSS) methodology, part 1 of the case study includes the Define and Measure stages of DMAIC. Part 2 features the Analyze, Improve and Control stages.

In the 16 months prior to the start of this project, the Strategic Sourcing department generated approximately $10 million in savings, an amount verified by independent associates in the Finance department . While Strategic Sourcing associates at the company are responsible for the large impact to the company’s bottom line, they are also burdened with the tactical work associated with issuing a purchase order to the supplier. The time spent on this tactical work represents a loss in the department’s ability to affect the bottom line through negotiations and supplier relationship management.

Project Charter

Project name : Requisition to purchase order process

Problem statement : 85 percent of purchase orders (POs) require manual intervention by buyers, resulting in an efficacy ratio of 44 POs/month/buyer. Company does not have a consistent process for the creation of POs in the system once a requisition is approved.

Benchmark efficacy ratios:

• Median: 50 POs monthly per buyer*
• Laggard: 21 POs monthly per buyer*

* According to the American Productivity & Quality Center (APQC).

Business case : Global procurement has reported cost savings (SAR) in the amount of $9.6 million/quarter for the past 16 months. If the department can increase the productivity per buyer by 6 POs/month, this would result in 9,485 hours or 4.5 full-time employees’ (FTE) ability to instead focus on strategic value to the company. Global procurement could increase SAR by $2 million/year.

In scope : Requisitions that are manually sourced to a PO by a buyer. The process begins when a requisition is submitted in the system of record and ends when a PO is dispatched to a supplier.

Out of scope : Current catalog auto-sourced (purchase orders generated directly from an online catalog that do not require a sourcing intervention) and interface (orders that come directly into the system from a vendor site and do not require the involvement of a sourcing associate) POs. International POs or POs not sourced through procurement.

Goal statement : Within three months, create a consistent, documented repeatable process for creation of POs to boost the efficacy ratio of 44 POs/month/buyer to 50 POs/month/buyer.

The cycle time for the purchase orders to be issued delayed the business units’ ability to receive the product and/or service associated with such savings (Figure 1). Additionally, the cycle time was interfering with the Sourcing associates’ ability to contribute toward the savings – avoidance or recovery – objectives (SAR). In addition to the dollar impact to the tactical work, multiple FTEs were needed to issue POs, creating inconsistency in timing as well as resource issues. The savings  was estimated at approximately $2 million in addition to a reduction in the number of FTEs required to process the POs.

SIPOC Analysis

The SIPOC (suppliers, inputs, process, outputs, customers) analysis begins with an email that is distributed to all sourcing associates that details a list of the requisitions with approval that need to be sourced to a PO. Since the categories for each sourcing associate are blurred, it’s a challenge for each associate to know who to send them to – creating distribution issues and adding to the cycle time.

Voice of the Customer (VOC)

We issued a one-question survey to about 170 employees – those who issue the most requisitions throughout the company.

Based upon your experience, how long does it take procurement to process a fully approved requisition into a purchase order?

• 41% = less than a business week
• 31% = 2 weeks
• 24% = 1 month
• 4% = longer than a month

Voice of the Business (VOB)

A similar question was asked to assess the VOB .

What is your desired timeframe for how long it should take procurement to issue a fully approved requisition into a PO?

• 72% = less than a week/5 business days

Process Map

Looking at the as-is process map (Figure 3), there are a striking number of steps and failure points in the process. It’s amazing that purchase orders are dispatched with any frequency! There are more than 40 steps in the current process, which has a direct result on cycle time.

Communication Plan

The communication plan shown in the table below was developed and shared with the project’s stakeholders.

Updated Project Charter

Changes to the charter were made after discussions on the potential impact of the project. It was determined that the project should result in an increase in productivity per buyer by at least 6 POs per month. The process would likely require fewer procurement representatives to process all the POs and could result in an increase in auto-sourced POs – or even move these to the Procurement to Pay (P2P) team. This, in turn, would free up resources from procurement to focus on strategic activities. This increase in productivity by the same 13.6 percent (the increase from 44 POs/buyer/month to 50 POs/buyer/month) should increase the SAR by an additional $5.5 million.

Updated business case : Global Procurement reported SAR in the amount of $9.6 million/quarter for the past 16 months. If the team can increase the productivity per buyer by 6 POs, this would result in a 13.6 percent increase in POs/buyer and allow the P2P team to source all POs under $50,000. This in turn would allow Sourcing to focus on strategic activities, which should increase productivity by the same 13.6 percent, resulting in an additional cost savings of $5.5 million.

In scope : PeopleSoft (supply chain management software) requisitions that are manually sourced to a PO by a buyer. The process begins when a requisition is submitted in PeopleSoft and ends when a PO is dispatched to a supplier.

Out of scope : Current catalog auto-sourced and interface POs.

Qualitative Analysis

In order to make the process efficient enough to either auto-source POs or transfer responsibility to the P2P team, it was necessary to review the as-is process map and determine which steps were non-value added. These steps couldn’t necessarily be immediately eliminated – it’s likely that a complete reconfiguration of the process would be needed. However, identifying the non-value added steps showed the team the complicated workflows that have high numbers of potential failure points and add additional stress to the outcome of the process. (See Figure 4.) The red process steps represented non-value added steps that do not contribute toward the completion of the activities. The yellow process steps represented value-enabled steps (steps that were added to satisfy stakeholder requirements). The green steps represented value-added steps (steps that contributed to the completion of the process).

The review revealed two key findings:

• 23 of the 43 steps were determined as non-value added steps.
• Fully one-half of the steps determined how to distribute requisitions to the correct buyer.

Measurement Plan

This measurement plan was originally sent out to determine the length of time taken for each PO. As the project proceeded in the Measure phase, the focus shifted from the time to complete the PO to the number of days it took before the PO was dispatched to the supplier.

The measurement plan included the total number of minutes spent processing purchase orders.

After the VOC survey it became clear that our internal clients were concerned with the length of time expressed as number of days as opposed to the number of minutes it took for an associate to produce a purchase order. It was also better data because we could precisely calculate the time the requisition was approved from the time the PO was dispatched thanks to the system’s time stamps.

In addition, when looking at the problems in the Define and Measure phases, it became clear that the actual time spent producing the PO was irrelevant because even if we were able to speed that up, it would still bottleneck at the distribution phase (from how the requisitions were assigned to each associate for processing into a PO). We couldn’t meet our clients’ requirements until the distribution was fixed.

Once the baseline data was collected, it became apparent the 40-step process was breaking down in the distribution of the requisitions to the buyers. While the mean number of days for 2015 and 2016 was relatively low (3 and 2, respectively), the standard deviation was another story. The standard deviation for 2015 was at 12 and 4.5 for the first part of 2016. This meant that the USL – upper specification limit, which was defined in this project as the number of days acceptable to issue a PO by our internal customers – was exceeded a whopping 47 percent (2015) and 33 percent (2016). Said another way, almost half of the POs that were being issued went beyond the five-day acceptable service level set by the internal customers (Figure 5).

Once the numbers provided insight to the significance of the problem, a fishbone diagram was created (Figure6) after a brainstorming session to highlight potential areas to test. The circled items represent areas the team wanted to test to determine how likely each issue was to affect the overall cycle time of the PO process.

Click here to read Part 2 .

About the Author

Andy Atkins

• South America

Procura+ Conference 2014 - Register now

Join us in lisbon on 13 & 14 march to learn how public procurement can implement step changes that can make a big impact, public procurement contributes to circular transition, learn more about how cities are using public procurement to further the implementation of the circular economy across europe, join iclei europe's sustianable and innovation procurement team, iclei europe is seeking to hire a senior expert sustainable and innovation procurement. the successful candidate will work at the forefront of european public procurement policy development, ec launches new platform for public procurers, join the public buyers community platform, case studies on sustainable and circular procurement.

Case studies showcase replicable sustainable, circular, and innovation procurement approaches and strategies. Our resource centre contains over 200 case studies which detail the methods used, the obstacles overcome and successes achieved in implementing sustainable public procurement.  Below is a selection of representative case studies that contain inspiration and guidance on how to implement sustainable, circular, and innovation procurement in relevant sectors.

Mainstreaming SPP

Metropolitan city of rome capital, developing a monitoring system for gpp.

The Metropolitan City of Rome Capital has been monitoring GPP since 2009, and in 2016, it introduced a new monitoring system linked to the public procurement electronic information system. This innovative, digital system makes it possible to require departments to attach relevant environmental criteria to procurement procedures.

City of Barcelona

Sustainable city council programme.

Barcelona City Council has been implementing SPP for almost two decades, and in 2006 it launched the +SCC programme which introduced firm purchasing commitments which are applicable to all council departments. Participatory processes have been central to the development of the +SCC Programme, and were used to develop strategic goals and define compulsory criteria for 12 high priority procurement categories.

Transport & Mobility

Catalunya region, cleaning the air through clean vehicle procurement.

The Catalan Government has multi-pronged approach to encouraging SPP of vehicles, including: provision of Green Vehicle Procurement Guide, development of specific government agreements to encourage procurement of low emission vehicles, supporting the Catalan Ecolabel, and promoting sustainable mobility.

Food & Catering

The city of copenhagen, supplying seasonal and diverse organic fruit and vegetables.

The City of Copenhagen is dedicated to ensuring its food and catering service is healthy, sustainable and appetising. The City has a target to supply 90% organic food across its 900 municipal canteens. In 2014 the municipality ensured that bids for fruit and vegetable contracts would include a variety of different sorts, varieties and types. This was the Procura+ Award winning tender in 2016 for Sustainable Procurement of the Year.

Plavinu Municipality

Testing circular school catering.

Plavinu Municipality wanted to sustain good quality catering in their school for a reasonable price. They also wanted to include circular aspects in the procurement in order to be more sustainable. The catering tender provided the opportunity to test circular economy aims, and is the first example of a circular public procurement supported by the Circular PP project.

Office Supplies & Stationary

Government of flanders, encouraging sustainable choices through an office supply framework (p+ awards winner 2018).

Flanders has set a target that at least 50% of products purchased in its latest office supply framework are sustainable. To achieve this, it used a mix of technical specifications and award criteria to encourage the inclusion of sustainable stationary products in the product inventory. In addition, it used contract performance clauses to ensure that the contractor works with users of the framework to ensure that the amount of sustainable products they are choosing is increasing over the lifetime of the contract.

MINISTRY OF DEFENCE, NETHERLANDS

Procurement of textiles from recycled fibres.

In its procurement of towels and overalls, the Ministry of Defence of the Kingdom of the Netherlands (MODNL) followed a circular policy and explored requirements around recycled fibres. The winning bids creating estimated savings of 233,000,000 litres of water, 69,000 kg CO2 and 23 MJ of energy. This was the Procura+ Award winning tender in 2017 for Innovation Procurement of the Year.

Cleaning Products & Services

Government of catalunya, socially responsible cleaning framework using green products.

The framework agreement for cleaning services, valid between December 2014 and November 2017, had the purpose  to  carry  out  environmentally-friendly  cleaning  services  in  buildings, premises and facilities with an administrative use.

Waste Management

Netherlands, efficient waste water treatment in the netherlands.

A competitive dialogue process was launched by Waterschapsbedrijf Limburg (WBL) for the design, construction, maintenance and operation of a waste water treatment plant (WWTP) in Venlo, with a high production of biogas, and reduced sludge.

City of Helsinki

Renewing the it equipment of the city of helsinki with low-carbon solutions.

This tender represents a model for fast IT renewal processes achieving remarkable energy savings. Estimations are based on approximated volumes for 7,000 basic computers, and 2000 laptops and 2,000 monitors. Calculations show that total lifetime cost savings for electricity are estimated to be 288,000€ and 27,4% CO2 emissions saved.

Construction, Buildings & Infrastructure

Rijkswaterstaat, sustainable reconstruction of the motorway a6.

Rijkswaterstaat (RWS) procured works and services to widen the A6 motorway, aiming for the motorway to be energy neutral after construction. RWS developed instruments to calculate the CO2 emissions, then selected a tender using a combination of price and quality according to the economically most advantageous submission. This was the Procura+ Award winning tender in 2016 for Tender Procedure of the Year.

Hyvinkää Municipality

Procuring the first nordic swan ecolabelled pre-school in finland.

In 2015, Hyvinkää Municipality set an ambition to procure the first ecolabelled pre-school in Finland. By building a pre-school to the standards necessary to achieve the Nordic Swan Ecolabel, Hyvinkää was able to promote a range of sustainability considerations, including promoting energy use and using sustainable building materials and methods. The winning bidder not only built the school, but also managed the ecolabel verification process, which the school successfully achieved in August 2017. This was the Procura+ Award winning tender in 2017 for Sustainable Procurement of the Year.

Public Health Wales

Reuse and remanufacture of office furnishings.

When Public Health Wales (PHW) moved offices in 2016, it wanted the successful bidder to use as much of its existing office equipment, furniture and flooring as possible, as well as supplying remanufactured goods from other sources. The winning consortium of social enterprises supplied over 2,500 items, with only 6% from new stock. The circular approach diverted 41 tonnes of waste from landfill with a CO2 saving of 134 tonnes.  This was the Procura+ Award winning tender in 2017 for Tender Procedure of the Year.

Bio-based products

Region of skåne, disposable bio-based aprons for skåne’s healthcare sector.

Innovation-oriented public procurement to purchase renewable (bio-based) aprons for the health sector in the Swedish region Skåne. The Regional Council decided to change their purchasing approach for protective disposable aprons to one which results in a purchase of a more environmentally-friendly product alternative. Skåne’s healthcare system in fact disposes of five million aprons every year (approximately 100 million for the entire Swedish healthcare sector), which together makes them one of the products with the highest carbon footprint.

Timber & Forestry

City of madrid, responsible timber procurement: from campaigning to implementing.

A case study on Madrid implementation of responsible timber procurement. Madrid is listed in the ‘green’ list of the WWF campaign “Cities Friends of the Forest”, amongst the top scoring in Spain for implementing procurement policies that give preference to suppliers of wood certified with the maximum guarantee of social and environmental criteria.

Transport for London

Innovative lighting procurement for london's underground network.

Best practice case study as part of the European Commission GPP In practice series focusing on TfL's extensive market engagement for the procurement of innovative lighting. TfL introduced a new WLC and performance based process for lighting. The process has been met with such success that it will now be applied to a range of other assets commonly found across London’s transport network.

WANT TO SEE MORE?

Check out our full list of case studies as well as tools, guidance, procurement criteria and much more.

Sustainable Procurement Resource Centre

Tools & Guidance

Need some help navigating sustainable procurement? Browse our curated page listing helpful tools and guiding documents. 

How to implement sustainable procurement?

Step-by-step on how to get started on implementation. Joined an interest group? How about monitoring? Or a sustainable procurement strategy? 

Training & Services tailored to your needs

Our training and consultancy programme assists public authorities of any size in starting or further developing sustainable, innovation, and circular public procurement.

How to Solve a Supply Chain Case Study Interview

• Last Updated January, 2022

Former Accenture

People can be nervous about approaching a supply chain case study interview.

Everyone has some level of experience with marketing and sales because they see these functions in stores and advertisements every day.

The supply chain that gets the product on a store shelf (whether it’s a physical one or digital) can be more opaque.

Supply chain management is the optimization of the process of designing and creating a good or service and getting it to the customer in the most efficient way possible.

Breaking the supply chain down into its component steps will allow you to look at essential parts of the process and uncover which steps may have problems that need to be addressed to better meet customer needs.

In this article, we’ll discuss:

• The types of business problems that fall under supply chain management,
• Why supply chain matters,
• Key factors to consider in a supply chain case,
• A supply chain case example, and
• Our 7 tips on answering a supply chain case interview question.

Let’s get started!

What Types of Business Problems Fall into Supply Chain Management?

Supply chain management includes:

• Product development, 
• Sourcing parts and materials, 
• Production, 
• Logistics, and
• Information systems that support this process.

Each consulting firm breaks down the group of consultants who work on supply chain problems differently. Some firms put the entire process under supply chain. 

In others, “production” problems are managed by an operations practice or service line. The supply chain practice is responsible for issues like:

• How does a company get the necessary components that go into making its product in a cost-effective and timely fashion?
• And how does the company deliver that product to the end-customer efficiently and at the required service level?

For example, before a company can manufacture a bike, it needs tires, steel, or aluminum for the frame, the bike chain, etc. To get the finished bike to market, they need transportation to retail stores or a chain’s distribution warehouse. 

For the purpose of this article, we’ll look at the broader definition of supply chain, the entire process from getting components parts, to manufacturing the product and delivering finished goods as cheaply and efficiently as possible while meeting or exceeding service level expectations.

Nail the case & fit interview with strategies from former MBB Interviewers that have helped 89.6% of our clients pass the case interview.

Why Does the Movement of Goods To & From a Factory Matter So Much?

Moving goods to and from a factory might not seem to be the most exciting thing in the world but it’s fundamental to business success. If you can’t get your innovative new product to market so your customers can buy it, it can’t add value to your bottom line. 

From a financial perspective, there are both inbound and outbound considerations. 

Inbound considerations include:

• Transportation costs from supplier to factory/warehouse
• Warehousing cost 
• Carrying cost of inventory

Outbound considerations include:

• Transportation costs from factory to customer or store

Let’s look at these in more detail.

Transportation Cost

Transportation costs include both receiving goods from suppliers and distributing them to the customer. There are several factors to be considered when calculating transportation costs, and they may have to be weighed against other factors.

For example, is it more beneficial to use a cheaper supplier that has higher inbound transportation costs? Is it better to use a more expensive carrier service that results in a lower rate of damaged goods or quicker transit time?

Warehousing Cost

The cost of storing inventory, whether component parts or finished products, needs to be considered in effective supply chain management. Warehousing costs can be significant and can be optimized in a number of ways:

• Only renting the storage space you need and using it efficiently.
• Optimizing product packaging to reduce the storage space required.
• Researching less expensive potential warehousing locations.
• Using a multi-client facility where several businesses share the cost (if not a lot of space is required.)

It’s worth bearing in mind that, like many things in supply chain management, there may be tradeoffs. Cheaper warehousing that’s poorly connected to a company’s distribution network could end up costing you more time and money than more expensive storage that’s well connected. It’s important to optimize total supply chain costs, not each individual cost in the supply chain.

Inventory Carrying Cost

In addition to storage costs, there are several other costs associated with holding inventory. These include:

• Capital cost . Money that’s been invested in inventory cannot be used elsewhere.
• Insurance . Storing inventory requires insurance to cover the risk of theft or damage.
• Risk . Products may decrease in value or become obsolete during the time they’re stored.

Similarly, from a customer service level perspective, there are both inbound and outbound considerations.

• Factory/production cell downtime due to lack of component parts. 
• Missed sales due to stockout at retail stores.
• Failure to meet customer service-level expectations.

In short, inventory levels are about managing supply vs. demand. If there is a problem with inbound supply, production will slow or cease. This is highly inefficient and reduces potential product profitability. 

For example, the blockage of the Suez Canal in early 2021 due to a container ship that ran aground was expected to delay shipment of $9.6 billion in goods a day on the 150+ vessels waiting to travel through the canal according to a BBC article. These delays are expected to cost companies substantial sums due to:

• Lost sales as customers look to competitors to purchase out-of-stock goods,
• Production downtime at manufacturers resulting from parts shortages,
• Higher shipping costs on ships detoured to longer, more expensive sea routes to avoid the canal, and 
• Higher shipping costs due to a worldwide shortage of shipping containers that was exacerbated by this accident.

Key Factors to Consider in a Supply Chain Case Study Interview

A supply chain process map.

When analyzing a supply chain case, the best place to start is by mapping out the steps parts go through as they come into the factory, go through the manufacturing and quality control processes, and then are finally shipped to the customer. A process map like the one above will help you identify key steps.

Imagine yourself walking the production floor following the process the parts and end-product go through. In a supply chain case with an actual client, you’ll do this.

An effective supply chain moves the various elements seamlessly in the most efficient manner, minimizing waste and maximizing profitability. The flow of information between supplier and buyer, production, and the market should also move freely. This means it can be used to improve supply chain decisions. For example, an increase in orders at Manufacturer A will be communicated to their supplier, Company B, so that they know that they expect a larger than normal parts order and are prepared to fulfill it.

Imagine How Raw Materials Arrive at a Factory and Move Through It

• What steps are required to get parts into inventory?
• Where are they stored?
• How are they moved around the factory?
• How are they changed to outputs – single step or multiple?
• Is there an assembly step? A quality control step?
• How are they packaged and stored?
• Where and how are they prepared and loaded for delivery to market?

Tip! Look for steps in the process where inventory is piling up. This may be because parts supply or production is unbalanced, reducing efficiency. Find ways to improve these bottlenecks.

Tip! Look for areas where there are significant problems with quality control. Parts or products that need to be sent back to suppliers or go through production rework are opportunities to improve efficiency and quality and, by doing so, save money.

After you have a clear understanding of the company’s supply chain, there are 4 factors you’ll want to dive deeper into to find opportunities to improve efficiency:

• Operational considerations,
• Financial considerations,
• Service levels, and 
• Matching supply and demand.

Operational Considerations

The best supply chains are highly efficient, which means they have low to minimal waste and consistently operate at optimum levels. This means that labor capacity is well-matched to production requirements.

They are also reliable with robust supplier relationships and an effective transportation solution.

Questions to Ask about Operational Efficiency

• Product development
• How well do we understand customer needs and use that insight to develop next-generation products?
• How efficient are we at designing new products to meet these customer needs?
• Is there a good split of engineering resources allocated to incremental product improvements versus next-generation product design?
• Do we regularly review contracts for cost-savings opportunities (both for direct spend on components that go into our end-products and indirect spend on things such as travel and office supplies)?
• Do we optimize total cost of ownership rather than individual component costs?
• Is the production process optimized or does work-in-process accumulate behind bottlenecked resources (equipment or employees)?
• Does the factory experience production shut-downs due to a lack of raw materials?
• Does the factory experience unexpected equipment downtime?
• Are employees cross-trained to minimize rework?
• How efficient is the inbound transportation network? Are raw materials received on a just-in-time basis? How often are there stock-outs?
• How efficient is the outbound transportation network? Are end products received by customers on time? 
• Are there product defects or quality issues caused by transport?
• Information systems that support this process
• Do information systems support the exchange of data up and down the supply chain to optimize decision-making?

Financial Considerations

There are both fixed and variable costs associated with getting a product to market that should be considered.

Fixed Production Costs

Fixed costs are costs that are independent of production volume (at least over the short term) — for example, factory leasing costs.

Let’s assume a factory can produce a maximum of 10,000 units of a product a year. To lease the factory is the same price whether you produce 1 unit or 10,000 units a year. 

Fixed costs can depend on production volume only when it exceeds a threshold volume.

For example, if sales increase and the business needed to produce 15,000 units a year, the company would need to lease another factory to deal with the increased production. In this case, volume does affect a fixed cost.

Fixed costs do directly influence the cost per unit, however. The higher the utilization of the fixed production volume, the lower the cost per unit. 

For example, if the factory mentioned above costs $10,000 to lease and the factory is producing at its full capacity of 10,000 units, then the fixed cost/unit of output is $1. If the factory is only running at 50% capacity, the fixed costs/unit of output would double to $2.

Variable Production Costs

Variable costs change in proportion to production volume. For every additional unit produced, an additional $x of variable cost is incurred. Examples of variable cost items include raw materials and hourly labor costs.

There are times when rebalancing fixed and variable costs can be an opportunity for savings. For example, is it beneficial to invest in machinery or automation (fixed cost) if it reduces high labor costs? Be sure to look for opportunities like this as well as optimizing fixed and variable costs on their own.

Questions To Ask About Financial Optimization

• How do increases and decreases in production impact fixed and variable costs?
• Are there variable costs that fixed costs could replace?  (Example: new machinery that could reduce labor costs as well as total costs of production?)
• Are there fixed costs that could be reduced through outsourcing? (Example: costs of leasing and managing a warehouse that could be reduced by outsourcing?)
• Where are the biggest opportunities for financial savings?
• How could reducing or increasing costs affect other considerations such as operational efficiency?

Service Levels

In supply chain management, the term service level has a specific meaning. It relates to how well inventory levels fulfill customer orders. A good service level is one that can fulfill customer orders without incurring a delay.

This is important because customer loyalty may decrease if products are consistently out of stock.

Questions To Ask About Service Levels

• What are the clients’ service level expectations?
• How often are customer orders fulfilled successfully?
• How would changing service levels affect buyer behavior or customer retention?
• How would changing service levels increase or decrease costs?

Supply and Demand

Effective supply chain management is about ensuring demand for the product is equaled by supply, at the lowest cost to the business.

If demand is higher than supply, customers could turn to a competitor.

If supply is higher than demand, inventory costs can reduce profit margins. Storing inventory also increases business risk as the product may decrease in value or become obsolete as it waits to reach the market.

Questions To Ask About Supply And Demand

• What factors influence supply?
• What factors influence demand?
• How good is the organization at forecasting demand?
• How flexible is the organization at changing output (e.g., are workers cross-trained for different production cells?)
• How well are supply and demand currently balanced?
• If they are imbalanced, what factors are contributing to this and how can those issues be fixed?

Supply Chain Case Study Interview – A Sample Question

Problem: Intel is the world’s largest manufacturer of computer chips. In 2008, Intel launched its low-cost “Atom” chip . The supply chain costs of Intel’s chips were about $5.50 a chip, which were acceptable for chips that sold for $100 each. For the Atom chips, priced at $20, these costs were too high to generate a profit.

What factors should Intel consider in order to reduce its supply chain costs, and what actions would you recommend as a priority?

Mapping the Supply Chain

Mapping out the supply chain process for Intel’s Atom chip identified several steps that had already been optimized including:

• Raw material costs, 
• Packaging costs, and
• Duty payments.

It also identified that customers required a 2-week service level for receiving orders after a purchase order was submitted. 

However, the order cycle for the Atom chip was 9 weeks. Order-cycle time is the time between when a customer order is received and when the goods are shipped. High levels of inventory were required to ensure that customer service levels could be met despite the long production cycle time.

Because of this, production time/inventory was identified as the key step that had opportunities for improvement.

Identifying Opportunities to Reduce Production Time and Inventory

The process for reducing inventory required reducing the order cycle time to meet the customer’s 2-week required service level. Getting to a 2-week cycle time from a 9-week cycle time was a considerable challenge. To meet this challenge, opportunities to improve order cycle time were addressed throughout the supply chain process. 

As described above, for a supply chain case, there are 4 main factors to consider:

• Service levels, and
• Supply and demand.

In drilling down on this case, the following opportunities were identified:

• Financial: Intel moved to a vendor-managed inventory model where possible to save inventory carrying costs. Vendor-managed inventory is the process of having a parts manufacturer take responsibility for holding the required amount of inventory at the customer location.  
• Operational: The team was able to identify multiple production process improvements to reduce order cycle time, such as cutting the chip assembly test from 5 days to 2 days.
• Service levels : As mentioned, the 2-week required service level was not flexible, providing no opportunities in this area.
• Balancing supply and demand: Intel introduced a formal sales and operation planning process to provide better demand forecasts and time production to better meet demand.

Our 7 Tips on Answering a Supply Chain Case Interview Question

Tip 1: walk through the supply chain process.

Start by mapping out the step-by-step supply chain process.

Understanding how materials arrive from suppliers, the steps to turn them into outputs, and what’s needed to get them to market is an important first step. Once you’ve done this, look for bottlenecks or inefficiencies in the system.

Tip 2: Clarify Your Understanding of the Case 

At the start of any case study, it’s important to make sure you understand the question. This includes any information you’ve received about the case and also what you think you need to do to solve it.

A simple way to do this is to repeat back to the interviewer what you know about the case and what you believe the task to be. This gives them an early opportunity to guide your thinking if you look to be going off track.

Tip 3: Ask Questions

If you don’t understand anything, ask! Even if you feel you should know something, there’s no point wasting time worrying about it. Just ask the question and move on.

Similarly, if there are gaps in the data provided, or you need more information in order to form a hypothesis or conclusion, ask your interviewer for more detail. They may provide further information that helps you choose an approach or strengthens your analysis.

Tip 4: Take Time to Structure your Thinking

Don’t be afraid to take your time when structuring your approach to the case. 

Moments of silence can feel endless in an interview situation, but it’s better to use some extra thinking time and respond clearly and logically than answer immediately in a rushed or haphazard manner.

If you need more time to think, it’s perfectly ok to signpost that to your interviewer by asking for a little more time to organize your thoughts.

Tip 5: Use A Framework

Frameworks are popular with both candidates and interviewers alike as they bring structure to your analysis. 

Case interviews can be daunting, and anxiety can make it tricky to think things through logically. Using a framework provides an anchor to organize your thoughts around and makes it less likely you’ll leave anything out.

In supply chain cases, the supply chain process itself can often be used as your framework.

Tip 6: Share Your Analysis

Speaking of analysis, don’t be afraid to share your thoughts aloud. A case interview should be more of a conversation than an interrogation!

Remember your math teacher always telling you to show your work? The same is true in case interviews.

Explaining your thought process helps the interviewer see how you process and make connections between pieces of information. They may also point out small mistakes in your arithmetic so that they don’t mess up your conclusion.

Tip 7: Provide a Recommendation

At the end of the interview, briefly summarize the information you’ve uncovered about the case and how it’s influenced your thinking. Then clearly state your recommendation for the client’s next steps.

Make sure you also share any other important details, such as any risks associated with your recommendation and how they might be overcome.

In this article, we’ve covered:

• Which business problems supply chain management covers,
• The reasons supply chain management is important,
• The essential considerations of a supply chain case,
• An example of a supply chain case, and
• Our top 7 tips for acing the supply chain case interview.

Still have questions?

If you have more questions about supply chain case study interview questions, leave them in the comments below. One of My Consulting Offer’s case coaches will answer them. Other people prepping for supply chain case interviews found the following pages helpful:

• Our Complete Guide to Case Interview Prep ,
• Case Interview Types , and
• Case Interview Examples .

Help with Consulting Interview Prep

Thanks for turning to My Consulting Offer for advice on supply chain case study interview questions. My Consulting Offer has helped almost 85% of the people we’ve worked with to get a job in management consulting. We want you to be successful in your consulting interviews too. For example, here is how Tanya was able to get her offer from McKinsey.

4 thoughts on “How to Solve a Supply Chain Case Study Interview”

I need to do a power point for an interview. I have to do a Logistics Analyst Case Study answering questions regarding delivery data for the supply chain and I can’t seem to figure out how to go about answering the questions. I need some professional guidance to help me through the process. Thank you.

Supply chain cases are challenging.

If you’d like an overview of how to approach answering a consulting case interview, our Ultimate Guide to Case Interview Prep is your best source. If you’d like a one-on-one coach for case interviews, including learning how to case in as short as a week, you can apply here .

I would like some more information on supply chain cases – interview’s specifically but not only

Hey, Michael,

Here are a couple publically available cases that might help you: Steel Co. from the NYU Stern 2019 casebook. https://drive.google.com/drive/folders/1AImB14ysaUoYBNw-ArtoCtzZA5cADUhy S.A. Shipping from the McCombs Texas MBA Casebook 2017-2018.

Best of luck on your supply chain case prep!

Leave a Comment Cancel reply

Save my name, email, and website in this browser for the next time I comment.

© My CONSULTING Offer

3 Top Strategies to Master the Case Interview in Under a Week

We are sharing our powerful strategies to pass the case interview even if you have no business background, zero casing experience, or only have a week to prepare.

No thanks, I don't want free strategies to get into consulting.

We are excited to invite you to the online event., where should we send you the calendar invite and login information.

• Sustainability Pledge

How rethinking RFPs has enabled an energy firm to harness new sources of innovation

Implementing a request for solutions process has improved this company’s ability to harness supplier and startup expertise

PMI’s approach to collaborating cross-functionally to transform its new product strategy

Philip Morris International’s procurement team built closer relationships with colleagues in the Product Development, HR, IT, and Quality functions to boost productivity and expand its electronics supply chain

The CPO Crunch

Inspiring CPO community insights – straight from the source into your inbox. Subscribe to your CPO newsletter:

Thanks for subscribing to the CPO Crunch newsletter.

Keep an eye on your inbox for your first one.

High Speed 2’s approach to building supply chain transparency

The UK’s railway construction project built a new risk methodology to understand the challenges facing its complex supply chain

PMI’s approach to functional transformation to support a smoke-free future

The procurement function at PMI required an overhaul of its capability development programme to support the business in making a transition to a smoke-free future

T-Mobile’s approach to boosting diversity throughout the supply chain

How T-Mobile placed diversity, equity and inclusion – including supplier diversity – at the heart of the combined business’s strategy

How procurement at UPS transformed itself from a transactional function to a strategic partner

How to transform your procurement function to bolster its capabilities and help cement a new relationship with the wider organisation?

Schneider Electric’s three-pronged strategy to support the transition to a net-zero future

The energy services providers’ sustainable procurement strategy has delivered improvements in carbon reduction, using sustainable materials and social inclusion

CBRE and Zurich’s approach to boosting spend with diverse suppliers and social enterprises

How to grow your social impact spending by acting as advocates for diverse and social enterprise suppliers with clients and internal stakeholders?

Pan American Health Organization’s digital endeavours to increase procurement speed and efficiency

How PAHO recognised that it needed to significantly speed up its processes in order to meet surging levels of demand

Privacy Overview

Submit the form to find out more about membership, thank you for your interest in our membership.

Intelligent procurement

• Call For Change
• When Tech Meets Human Ingenuity
• A Valuable Difference
• Meet The Team
• Related Capabilities

Call for change

As procurement functions realize the value their data and their relationships with third parties can add to an organization, they are trying to shift from their traditional offering of transactional compliance to being a business partner that can help their companies grow their bottom line.

Making this transition means standardizing, simplifying and automating the elements of traditional procurement to create a frictionless buying experience. This accomplishment will help move procurement functions toward enabling intelligent procurement.

As Accenture makes this shift itself, we recognized the need for a strong data and analytics foundation. Our Procurement Plus organization—so named with the word “Plus” added to reflect the shift in delivering value above and beyond what is expected of traditional procurement—is developing a data strategy and program to empower us to be more data driven in analysis, information tracking and decision making. We recognize this is a journey, and like all transformations today, the journey is best undertaken in an agile way.

When done right, a data and analytics strategy is a powerful tool that enables Procurement to be a valuable business partner delivering real change as our Procurement Plus did with Accenture’s closed-loop spend management (CLSM) approach . CLSM is a new, data-driven operating model for managing the source-to-pay life cycle that targets indirect and direct costs for meaningful and sustained transformation.

Procurement Plus by the numbers

procurement spend

invoices paid

ventures & acquisitions work projects

US spend with diverse suppliers

As of Accenture fiscal 2020 year end. *On top of standard procurement FTE it includes more than 500 FTE in Accounts Payable and our internal contractor managed service provider.

When tech meets human ingenuity

In our attempt to deliver a data strategy, we started small with the focus on delivering value. This approach allowed us to gain support for a larger investment to turn us into the intelligent procurement function that we aspire to be.

Digitizing processes to create access to data

Our agile journey to transform procurement began with Accenture’s move to  SAP Ariba Buying and Invoicing  and the deployment of the Guided Buying capability across Accenture to improve the buying experience. Our Procurement Plus and  global IT  organizations have continued to collaborate to enhance our capability. We are transforming content, digitizing procurement processes, building automations and intelligence on SAP Ariba, all on the journey to developing intelligent procurement.

Throughout this time, we’ve gained experience in addressing data and developing analytics solutions along with Accenture’s  Applied Intelligence  organization. Together, we have developed several advanced analytics solutions that help us address specific issues today.

Setting the foundation for advanced analytics

The advanced analytics solutions we have developed include:

Ariba procure-to-pay process improvement.  We are using  Celonis , a process mining and execution management solution, to identify and remove bottlenecks in the procure-to-pay process and improve the quality of execution. In so doing, we are optimizing standardization at scale. The data visualization capabilities of Celonis are helping us to develop deeper insights, allowing us to have fact-based conversations and highlighting similarities or differences of workflows, categories, or countries that are impacting global process turnaround time. We are leveraging the newer workbench and execution management capabilities to automate the execution of activities to confirm we can offer a higher level of operational service without increasing head count. This is a powerful enabler for change.

General ledger recommendations.  We are using  predictive analytics to identify and assign the financial data  on requisitions and non-purchase order invoices. This capability better prepares buyers who are less familiar with accounting to be more accurate with their purchases, improving their user experience and significantly streamlining downstream accounts payable accuracy, time and cost.

Predictive contractor fulfillment.  This tool uses predictive analytics that draw on historical information to help Accenture determine whether a contractor request can be filled. It also helps to assess the quality of the requirements and to view trends on cancellations by categories, clients and geographies. The tool allows our contractor onboarding teams to apply their time where it’s most valuable, delivering huge time savings in effort and higher satisfaction from suppliers in the quality of requests that they receive.

360-degree supplier relationships view.  By integrating data about Accenture’s family of suppliers with Dun & Bradstreet services, this tool helps us understand the full scale of the relationship and partnership Accenture has with our suppliers, which is the key to gaining better insights as we partner with them.

Metrics at users’ fingertips.  We have created and integrated targeted dashboards across the procure-to-pay and accounts payables areas to cascade to any user. The dashboards present performance against service level agreements (SLAs) and other business outcomes and key performance indicators (KPIs). They also derive data-driven, actionable insights and determine high-impact opportunities for process and key outcome improvements.

Creating a holistic, robust digital strategy

Developing these specific solutions has allowed our Procurement Plus team to reach a mature stage in advancing our data strategy and deliver valuable use cases that showcase the return on investment to leadership. This demonstration has enabled us to begin the next phase of execution on our data and analytics journey.

Data Strategy. Our approach now consists of two layers: the first is the normalized movement of data to enable a simplified user experience and the second is the positioning of data in a shared location so that it can be consolidated and consumed. With this central storage in place, procurement data can be analyzed effectively cross-process. This ability allows us to gain new insights and be able to answer future, unanticipated questions based upon new business disruptions.

This new data-centric environment also allows us to accelerate development of more advanced solutions supporting the connected buying experience for our people, comprehensive frictionless third-party risk management, and intelligent procurement.

Connected experience . To reduce friction for our people, we are developing a “connected experience” for buying that is underpinned by a fully digitized process enabled by data and analytics. We recognized the need to give Accenture people a more effective response to “how do I buy something?” and be navigated through the procurement process.

Our connected experience capability consists of several key components. We are developing a “front door” via ServiceNow to provide users with a single and connected entry for all their procurement needs. Sourcing will be automated and handled through a dashboard giving users updates and reminders from all procurement systems all in one place.

The workflow data architecture will then connect all sourcing activities with the correct buying channel. This architecture will essentially bring our sourcing activities from the front door together with the buying into one central data lake that is curated and integrated. This visibility will confirm, for example, what we bought from a supplier and whether we paid them according to the terms agreed upon during our sourcing and contracting process. These and many other insights will enable us to measure process effectiveness through the total life cycle of procurement.

Third-party risk management. The data journey and the connected experience will support third-party risk management. By capturing the data in a curated fashion, from the time we make a request to buy through our sourcing and contracting activities and the buying process, we can measure the relative risk of any given supplier compared to others, both from a compliance and performance perspective, according to the criteria we set forth on what defines risk. Bringing together more data elements enables us to establish a risk score and gain a full view of each supplier.

Leveraging data to drive intelligent procurement

With the data we now have, we’re able to answer questions that we could never answer before. For example, we can measure whether our respective spend category plans are being implemented as intended. Detailed insights regarding spend and performance will move Accenture toward engaging with suppliers that are the best fit for our categories.

The insights help us confirm that we are engaging with the right suppliers to contribute to Accenture’s innovation and sustainability agenda. The insights also help us to obtain better arrangements, pricing, and quality and help us be smarter with the suppliers we’re engaging with, ultimately driving margin, where possible.

A few example use cases include compliance to contract and payment terms, demand concentration according to category plans, and balance of trade. Yet another example is getting a better sense of the trajectory around contractor needs in relationship to demand trends and costs. All these user scenarios were developed by a structured input/output review of data traversing the procurement processes. The outcomes help to highlight current disconnects in the process and identify the data that will be needed to join the processes automatically and analyze their effectiveness.

A valuable difference

The future of procurement is in intelligence. By unleashing data and analytics as we progress on our program journey, we anticipate gaining new insights to get better at managing the total procurement life cycle while continually improving the customer experience.

Key outcomes from our journey with process analytics:

Celonis Continuously improves the customer experience and effectiveness of internal teams by reducing friction and improving turnaround time

Predictive contractor fulfillment Fulfills contractor requests much faster and more effectively than our previous process and with less manual effort

General Ledger Recommendation Delivers an improved procurement experience and greatly streamlines accounts payable accuracy, time and cost

Connected experience Planned to be more comprehensive and standardized than today in guiding Accenture people through the buying process

“Bringing the right data and steps together in the procurement process will give us enormously valuable insights into how we’re contracting and buying and with which suppliers.” — PATRICIA MILLER , Managing Director, Procurement Plus – Digital Transformation, Accenture

Annualized working capital benefits delivered by having greater visibility into our pending invoices, as of fiscal year 2021.

Reduction in invoice approval time.

Improvement in request-to-order time.

Meet the team

Tricia Miller

Jim Gradeless

Scott Perkins

Related capabilities, corporate services & sustainability.

These teams are enabling innovation, growth and business continuity for Accenture.

How Accenture does IT

Sourcing and procurement.

GOV.WALES uses cookies which are essential for the site to work. Non-essential cookies are also used to tailor and improve services. By continuing to use this site, you agree to our use of cookies.

Procurement case studies

Best practice and lessons learnt in public sector procurement.

• Public sector procurement (Sub-topic)

Case studies

• Procurement brings local benefits to local people 2 May 2024 Case study
• Swansea leads the way in prompt energy payments 19 March 2024 Case study
• Electric vehicle purchase collaborative procurement 11 March 2024 Case study
• New liner service supports a greener Wales 24 January 2024 Case study
• Future proofing the procurement profession in Wales 19 October 2023 Case study
• Framework for the provision of supply teachers 9 October 2023 Case study
• Sophie adds a touch of style to procurement 16 December 2022 Case study
• ELITE clothing solutions excel with social employer ethos 7 December 2022 Case study
• Brian’s story: the path to a positive future 11 November 2022 Case study
• Delivering social value through collaborative commercial activity 11 November 2022 Case study
• Innovative procurement initiative makes a noise 5 August 2022 Case study
• Social enterprise delivers green hybrid work hubs 3 August 2022 Case study
• Investing in the future of procurement professionals 29 September 2022 Case study
• Caerphilly furniture contract 18 October 2021 Case study
• Visitor pods for care homes 22 March 2021 Case study
• Welsh Government invests in the future of procurement professionals 18 March 2021 Case study
• Barclaycard ePayments Service 18 March 2021 Case study
• Digital signatures 1 November 2020 Case study

First published

Last updated, share this page.

• Share this page via Twitter
• Share this page via Facebook
• Share this page via Email

• Barkers Procurement is a multi-award-winning procurement consultancy offering high quality procurement and commercial services, delivered by committed and experienced practitioners with integrity.
• Our Clients
• Our Achievements
• Case Studies
• Testimonials
• Strawberry Fields Digital Hub, Chorley PR7 1PS
• +44(0) 330 133 0418
• [email protected]
• Cost Transformation
• Procurement Transformation
• Procurement Managed Service
• Digital Procurement
• Coupa Implementation
• P2P Diagnostic
• SME Procurement savings
• SME Procurement as a Service
• Contract Lifecyle Management
• Bid Writing Service
• Barkers Constellia Solution
• Land, Property, Construction & Facilities Management
• Public Sector
• SME Procurement
• IT Procurement
• Join the Team
• Support Papers
• White Papers

• Spotlight on Social Value
• News and Events

Argent Energy – Procurement Transformation

• August 18, 2020
• Warren Kozera
• No Comments

Procurement Transformation – Argent Energy needed to review their processes and systems for the ordering and payment of goods, services or works. We enabled Argent to identify process improvements and savings opportunities and implemented a cost-saving procurement strategy which could be used to deliver commercial activities across a wide range of core areas. In addition to benefits realisation, following our review, Argent Energy now also have more time to focus upon SRM and strategic procurement activity.

Argent’s current ways of working and team structure operated on a tactical and transactional basis. In summary, the activity was focussed on reviewing quotes and raising purchase orders.     The challenge was to support the team to improve their systems and processes, reduce costs and enable the function to be more strategic in their approach.

We undertook a procurement review exercise, which involved interviewing a wide range of stakeholders across the business. Following this, we drafted a 6-month plan to develop the procurement strategy across the business. The four key areas of focus were:

• Procurement Policy and Procedures – We firstly implemented a whole new suite of procurement documentation. This included the creation of a Procurement Manual and Contract templates for Goods, Services and Works. We then implemented associated policies and set expectations surrounding key procurement processes. New ways of working were implemented which enabled the team to work on a priority basis and ensured no duplication of activity.
• Savings Opportunities – We provided category-specific market intelligence across various categories, identified savings opportunities and negotiated better pricing on behalf of Argent. A rolling procurement programme was implemented which ensured addressable spend is now tendered every three years. On-site support of the tendering process (from scope to delivery and contract management ) was provided across multiple sites. Key suppliers were targeted for a proposal that details the service levels and discounts they can provide for 12/24/36 month contracts. For high volume suppliers, we implemented a weekly/monthly PO per supplier to allow the team time to focus on strategic procurement .
• Governance and Reporting – Following our guidance, Argent have now implemented Power BI which has been key to identifying savings opportunities and process improvements. Standard KPI measures are now also being added to key contracts and are being reported back as a balance scorecard to support process improvements.
• Right size review – We identified that the team needed to shift from a Purchasing function to an Indirect Procurement function. Following training and development, the team now focus more on Business partnering with stakeholders rather than admin processing.

Formal tenders delivered savings benefits whilst also reducing the commercial risk to the organisation.

The implementation of new key suppliers to Argent has given the team the ability to focus on strategic procurement activity, whilst showing true bottom-line savings.

Moving forward the team has more time to focus on Supplier Relationship Management activities, to ensure the continued success of the contracts being implemented.

“The Barkers Led Procurement transformation at Argent had an immediate positive impact. The Barkers team positively engaged with the business and helped deliver procurement improvements to the indirect categories of spend. These changes enabled a step changed for how procurement was viewed across the business.” Nicola Dean, CFO, Argent Energy

Barkers: Argent Energy Case Study

Latest Support Paper

Social Media

• Printer-friendly version

Case Studies

Managed print services.

A case study from Fife Council. 

The objective was to promote the social, economic and environmental well-being of the community by introducing digital transformation that drives efficiencies and cost savings and is focused on employees and citizens.

Circular Economy

• Coronavirus Updates
• Education at MUSC
• Adult Patient Care
• Children's Health
• Hollings Cancer Center
• Research at MUSC
• MUSC Catalyst News

Stroke-care metrics improve with stroke center certification and coordinators

Key stroke-care metrics improve at telestroke hospitals with stroke center certification and stroke coordinators.

That’s what NORC researchers at the University of Chicago found when they conducted an external evaluation of MUSC's  telestroke program . NORC, which stands for National Opinion Research Center, and MUSC researchers report their findings in the Journal of Stroke & Cerebrovascular Diseases.

Mithuna Srinivasan, Ph.D., principal research scientist at NORC, is the lead author of the article and MUSC telestroke and telehealth experts Christine Holmstedt. D.O. , Jillian Harvey, Ph.D. , Ryan Kruis, Ph.D., and Shay McLeod are co-authors .

MUSC was chosen by the Centers for Disease Control and Prevention for evaluation by NORC to generate practice-based evidence and inform telehealth practice

Stroke is a leading cause of death and life-changing disability, and almost 800,000 people in the U.S. have strokes each year. Most of those strokes are ischemic or caused by a blood clot blocking an artery. Long-term disabilities due to ischemic stroke can often be minimized if patients receive appropriate treatment, but these must be administered within a very tight time frame of a few hours. Yet many people do not live near stroke centers where such therapies are available.

Telestroke was implemented to address this problem, using technology to allow specialists at hub hospitals to communicate with physicians and evaluate stroke patients at spoke hospitals across the state or or region. A hub-and-spoke model organizes care through a central hub and secondary spokes: Hub facilities offer a full range of services, whereas spoke facilities offer fewer intensive services.

“The assessment confirms that stroke patient outcomes improve through the development of an evidence-based telestroke program. Our hope is to inspire other institutions to develop similar programs to provide stroke care where it is needed most.” -- Dr. Christine Holmstedt

The impact of telestroke on stroke care and outcomes is widely acknowledged to be revolutionary. Undoubtedly, it has been a game-changer for improving stroke care in South Carolina, where MUSC launched its telestroke program in 2008.

“The telestroke program has had a huge impact on the ability of South Carolinians, especially those living in rural parts of the state, to access specialized stroke care,” said McLeod, telehealth nurse manager for acute care services at MUSC.

Thanks to the telestroke program, all residents of the state now live within an hour of specialized stroke care.

"Our unadjusted analysis showed that, compared with spoke hospitals with neither of these two components [stroke coordinators and stroke center certification], encounters at hospitals with both had nearly 20-minute faster DTN times.” --Dr. Mithuna Srinivasan of NORC

Although the program had always conducted its own rigorous assessments and made improvements based on the data, its leaders were delighted by the opportunity for an independent evaluation by NORC and pleased that its findings showed the program’s impact on patient care.

“The assessment confirms that stroke patient outcomes improve through the development of an evidence-based telestroke program,” said Holmstedt, who is the program’s physician leader. “Our hope is to inspire other institutions to develop similar programs to provide stroke care where it is needed most.”

Telestroke’s impact on the quality of stroke care is widely acknowledged, but it is less clear which aspects of telestroke are the most beneficial.

NORC and the MUSC researchers set out to examine whether two telehealth components, stroke center certification and stroke center coordinators, improve door-to-needle (DTN) time, or the time it takes after arrival at the hospital for eligible patients to be administered the clot-busting drug tPA, which can minimize disabilities post-stroke.

The study showed that spoke hospitals with both stroke certification and stroke coordinators had substantially better DTN times.

“Our unadjusted analysis showed that, compared with spoke hospitals with neither of these two components, encounters at hospitals with both had nearly 20-minute faster DTN times,” said Srinivasan.

“The findings highlight the additional benefits of employing stroke coordinators and taking the additional steps needed to become a stroke center.” -- Dr. Jillian Harvey

Harvey believes that the findings of this external evaluation reaffirm the efforts of many of the spoke hospitals in MUSC’s telestroke program.

“The findings highlight the additional benefits of employing stroke coordinators and taking the additional steps needed to become a stroke center,” she said.

Srinivasan agrees and sees the importance of these findings for telestroke programs across the country.

“Having foundational infrastructure or stroke-care components, such as stroke coordinators and stroke center certifications, can certainly help to improve the quality of stroke care under a telestroke program.”

In the study, smaller-sized and rural hospitals showed the strongest association between these two components of stroke infrastructure and improved DTN times.

“This might be due to a resource issue,” said Harvey. “Larger hospitals already have a lot of resources and economies of scale, but bringing additional support to small- and medium-sized hospitals might be more meaningful and more impactful.”

Finally, the study noted inequities in the distribution of telestroke resources. It documented fewer telestroke encounters for racial and ethnic minorities and found that many of them were treated in spoke hospitals without stroke center certification or stroke coordinators.

“As we scale up telestroke, we should take into account that rural and small hospitals may be less likely to acquire the components of stroke care tied to improved outcomes,” said Srinivasan. “In rolling out telestroke, we must take care not to exacerbate disparities and lack of telestroke access.”

Further studies are needed to explore the impact of other telestroke components, such as leadership and funding support, on stroke center metrics. Such studies would identify the elements of telestroke infrastructure most responsible for improved stroke-care metrics, providing a roadmap for efficient and equitable telestroke implementation.

Srinivasan M, et al. The role of stroke care infrastructure on the effectiveness of a hub-and-spoke telestroke model in South Carolina. J Stroke Cerebrovasc Dis. 2024 Jun;33(6):107702. doi: 10.1016/j.jstrokecerebrovasdis.2024.107702. Epub 2024 Mar 29. PMID: 38556068; PMCID: PMC11088489.

About the Author

Kimberly McGhee

Categories: Impact , Research