Local Buying at Fenwick Industrial Supplies
Fenwick Industrial Supplies has grown from one site to four in three years. Each site manager buys what they need locally. Last year the company spent £2.4 million with 312 suppliers, of which 190 were used by only one site. Finance found the same bearing bought at £18.40, £21.00 and £26.75 across the sites, and 41 suppliers have never been through any credit, insurance or modern-slavery check. There is no central contract register. The newly appointed head of procurement has one analyst and no authority to block orders. The operations director argues that local buying is faster and that a central team will slow everything down.
1. Recommend a procurement structure for Fenwick and justify it using the evidence in the case.
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Recommend a centre-led (hybrid) structure, not full centralisation.
Evidence driving the recommendation:
- 312 suppliers for £2.4m is roughly £7,700 average spend per supplier - far too fragmented to manage or leverage.
- 190 suppliers used by one site only indicates duplication of the same categories across sites.
- Prices varying from £18.40 to £26.75 for an identical item is a 45% spread: a clear consolidation prize.
- 41 unvetted suppliers is an unmanaged risk the company cannot defend if something goes wrong.
Design: the centre owns strategy, contracts, supplier vetting and a common-item catalogue; sites retain authority for low-value, site-specific needs under a defined threshold (e.g. £2,500) and buy common items from the catalogue. This captures the savings where duplication exists while leaving genuine local discretion intact.
Full centralisation would meet the operations director's objection head-on and probably be bypassed; doing nothing leaves 45% price variance in place.
2. How would you respond to the operations director's objection that central procurement will slow things down?
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Meet the objection with the objection's own logic - speed - rather than with an argument about control.
- Reframe the offer: the aim is to make the compliant route the fastest route. A catalogue with pre-agreed prices and pre-vetted suppliers removes the need to ring round for quotes at all.
- Use the numbers: 14 days of site manager time chasing prices is not speed, it is rework; 45% price variance is money the sites are not spending on their own operations.
- Pilot one category in one site for a quarter and measure order cycle time before and after. Evidence persuades where policy does not.
- Give him a role: ask him to set the threshold and to sit on the category review, so the design carries his authority.
- Be honest about the trade-off: some autonomy is being traded for leverage and risk cover - say so explicitly rather than pretending nothing changes.
If he still resists, escalate on risk grounds: unvetted suppliers are a company-level exposure, not a site preference.
3. What three measures would you report monthly to show whether the new structure is working?
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- Spend under management (%) - the share of the £2.4m going through contracted or catalogue suppliers. This is the primary adoption measure; if it does not rise, the structure is not working regardless of what the contracts say.
- Price variance on common items - highest versus lowest price paid for the same item across the four sites. Target: converging towards the contract price.
- Supplier compliance rate - percentage of active suppliers with completed credit, insurance and compliance checks. Start by clearing the 41, then report the ongoing figure.
Optionally add supplier count and duplicate-supplier ratio as secondary indicators.
Each measure should have a named owner and a target, and be reported alongside a short narrative explaining movements - a number with no explanation invites the wrong conclusion.