Contract Management

NEEDS-BASED RESULTS

 

Contract Management

SITUATION

Major mining company needed to develop a more robust approach to working capital management and optimum management of existing contracts.

DRIVER GOAL

  • Reduce working capital required for running the business.
  • Reduce contract spend.
  • Enhance contract management abilities.

RESULT

  • Improved AP performance from DPO of 18 days to 40.
  • Moved 70% of contract spend management under new monitoring system.
CS-353 large

Case Study

Reduce Working Capital & Improve Contract Management

PDF

Issue

A major mining company enlisted The Highland Group to develop a more robust approach to working capital management, implement policies, procedures and practices that are conducive to optimum management of contracts already in place, and create accountability for and visibility to actual contract spend.

Highland Approach

Highland began with an assessment to identify the changes to policies, procedures and practices needed to achieve the Driver Goals and the benefits of doing so. The resulting implementation plan focused on Accounts Payable, Contract Negotiations, Contract Management and Spend Management.

Actions Taken

In Accounts Payable:

  • Changed payment frequency, terms enforcement and payment terms extension, resulting in DPO (Days Payable Outstanding) moving from an average of 18 days to 40 days.

In Contract Negotiations:

  • Worked with Centralized Procurement to renegotiate terms with the top 25+ vendors, achieving an average savings of 13% on 29 contracts with an annualized savings of $9.1 million (over $2 million realized before the end of the project).

In Contract Management:

  • Reduced and controlled contract spend by implementing a System For Managing, which gave the “owners” of contracts monitoring capability of 70% of the contract spend on a daily/weekly basis.

In Spend Management:

  • Developed a special application to manage actual spend with drill-down capabilities by category and supplier, resulting in an actual expense 7.3% ($18.2 million) below revised spend through the end of the project.

Reduced contract spend by

12%

by renegotiating contracts, saving $9.1 million

I would recommend The Highland Group, especially if you are looking for fundamental change at an accelerated pace.

Chief Operating Officer

Related Information

subject matter-based

Senior Consultant

Supply Chain

Europe

Laurence has more than twenty years of industry and consulting experience in all areas of supply chain management – including inventory management and procurement – and in Total Working Capital management.

Senior Consultant

Working Capital

North America

Joe is an innovative and versatile professional with over 25 years of solid experience building, growing and operating diverse, multi-faceted and geographically dispersed global high-growth organizations. He has an exceptional track record of managing projects that deliver credible and sustainable improvements in cash management, operations, service quality and cost.

Project Director

Working Capital

Europe

Hamid has over 20 years of experience as a management consultant. He has a wealth of experience in process and operational improvements, corporate strategic planning, development and deployment, global sourcing, supply chain management as well as working capital improvement experience (A/R, A/P, Contract & Vendor Management, Inventory, MRO/Materials & Supplies).

Senior Analyst

Mining

North America

Luis is an executive with more than 15 years of experience in managing various mine implementation projects. Most recently, he has been the Lead Analyst for our Discovery and Design process. He is responsible for the assessment and quantification of opportunities as well as developing sustainable solutions for our clients.