Millions Saved in Overheads through Product Classification
One of the largest credit card companies in the United States needed to discover how its financial product was performing online. The company required fresh market intelligence to develop a plan for increasing the acceptance of its product among merchants and to strengthen the overall value of its merchant network.
The Challenge
Not surprisingly, following this reorganization the new IT architecture required extensive cleansing of the data from each of the divisions. Each of the prior businesses had used different approaches and standards in managing its vendors.
The cost reduction associated with procurement was dependent on the manufacturer's ability to analyze vendor utilization and spend patterns. The analysis would require research on 240,000 products.
Finally, the company had over 1,500 purchasing agents globally that would use and maintain the new system within 3 months after the IT infrastructure was operational. Business Oriented Decisions.
The Solution
PeopleForce was retained to research the products and to prepare the product data for spend analysis. Our project involved the mapping of old product descriptors into a standard schema.
The product records were initially analyzed for duplicate occurrences, then 80,000 unique items were mapped to the UNSPSC code structure by PeopleForce team members with specific knowledge and experience in industrial operations. When the legacy file data was inadequate, PeopleForce conducted external research in order to establish the proper classification.
The review process was completed in three weeks. PeopleForce helped the manufacturer reengineer its procurement function by better understanding its vendors' products and improving the process through a streamlined ERP implementation.
Throughout the project, business impact, not technical perfection, drove technical choices such as the level of granularity of the research and the resulting quality levels.
The Results
The manufacturer realized savings in excess of $10 million in the first year, as measured by the reduction in SG&A as a percentage of operating revenues. In Year Two, an additional 8% reduction in operating expenses was achieved.
