Material Cost Reduction at Sparkasse Bremen AG – Strong regional trading traditions and cutting-edge cost management
Sparkasse Bremen has maintained its traditional regional business links and lowered its material costs through professional procurement.
When sourcing consultants from INVERTO started a project at Sparkasse Bremen in May 2010, their task was clear. The Northern German company wanted to review and optimise its material costs. In particular, the external consultants were to ascertain the range of requirements and optimise all sourcing processes in the company’s IT, facility management and marketing departments.
From the outset, it was clear that Sparkasse Bremen considered itself a partner for the region’s SME’s. Therefore, the project focused on strategies such as process optimisation, intensifying competition, make-or-buy scenarios and intensive supplier development rather than approaches such as global sourcing.
First step: Requirement and process analysis
There was no standardised system for recording individual orders in the various departments. During the initial phase of its analysis, INVERTO relied on accounts payable data, using systematic requirement clustering to compress this. It also conducted separate interviews with the various departments. Crosschecks with budgets and order lists added greater weight to the results. Therefore, the project team built-up a complete overview of the contract situation as it stood and was able to outline a product group structure geared to the procurement market and existing procurement management processes.
The next step was to develop measures to realise the potential for optimisation. The individual projects detailed below were particularly effective in this respect.
Print services – process optimisation and co-sourcing
The decentralised sourcing of print services represented a major challenge for the INVERTO team. One of the project team’s asks was to create a centralised and flexible order catalogue for print services that every department could utilise. This initially involved a great deal of detailed work. A catalogue of requirements was created based on the detailed analysis of invoices and interviews with the requisitioning departments.
Sparkasse Bremen used a systematic tendering process to build up a cross-departmental pool of preferred suppliers. There were fewer suppliers than before, but they were selected precisely because they satisfied jointly agreed criteria. The outcome is that there is at least one alternative for each supplier in the pool and each has different strengths (small and flexible, large with a high capacity, offset or digital, etc.). This gives Sparkasse Bremen the optimum supply base structure for every scenario.
The procurement management team now has central responsibility for printing requirements. The various departments are still responsible for budgeting and product specification, but the procurement management team can now assess annual requirements, standardise and secure favourable terms.
Key factors for the success of the project involved intensifying competition by putting printing requirements out to tender and optimizing the sourcing process. However, long-term success was ensured by holding joint workshops for the various departments during the pilot phase and regular weekly meetings during the project itself.
Cleaning – classic co-sourcing
For a bank such as Sparkasse Bremen with a network of more than 70 locations throughout the city, a large proportion of the costs of facility management is accounted for by cleaning. The sourcing strategies used in this area were intensifying competition and pooling services.
The clear objective was to maintain the same scope and specifications of services and to leverage synergies by awarding contracts for large work packages. Glass and routine cleaning were complicated by the challenging architecture of the various buildings. Once again, the initial task was to prepare specifications and bid forms for the online tendering process –based on the existing situation. All services, such as the frequency of cleaning, remained unchanged. During the tendering process, the feasibility of the cleaning times quoted for each branch was also checked to ensure a realistic and sustainable price.
On completion of the first round of the tendering process, selected departments and branches were inspected with the short-list potential suppliers. Contracts were ultimately awarded to a smaller number of suppliers.
Facility management – outsourcing
In 2002, Sparkasse Bremen implemented a complex project to optimise internal services. It outsourced services to a full-service provider that had also taken on the bank’s existing staff. The outsourcing contract was made-up off 77 separate service level agreements. INVERTO performed a detailed analysis of this contract, which had been adapted to the bank’s requirements. It was split into segments, with INVERTO examining services that could potentially be dispensed with along with the terms and conditions of the full-service provider and the subcontractors used.
During the analysis phase, the focus was on cutting costs by dispensing with services. In addition to close cooperation with the bank departments involved, this required excellent coordination and clear communication on the part of the service provider. This was the only way to ensure that dispensing with services was realistic and cost-cutting potential could be identified without affecting the quality of services.
Call centre – outsourcing
Before the project started, the call centre’s services had already been taken over by a wholly owned subsidiary of Sparkasse Bremen. The aim was to use benchmarking and process analyses to assess the call centre’s efficiency. The requirements were put out to tender and at the same time, the subsidiary’s processes and cost structure were analysed to identify cost drivers and potential for optimisation.
To ensure a high level of service, it was ultimately decided to stay with the existing supplier. Having examined the technical requirements and options, it was possible to restructure the call centre by transferring services and thus to make savings.
Effective involvement and coordination a recipe for success
The issues addressed during the ten month project extended far beyond traditional sourcing. Effective cooperation was therefore needed at all levels of the project team. It was also very important to be fair and transparent when dealing with suppliers, mainly SMEs based in the Bremen region.
From the outset, the project team was aware that it needed to strike a balance between regional responsibility and cutting-edge cost management. It succeeded in doing so by ensuring open communication and trusted cooperation from the very start. Sparkasse Bremen has achieved a good balance between tradition and cutting-edge cost management.