As we noted at the end of the previous installment in this series, CPS is pulling out the standard strategic sourcing handbook to drive procurement savings. In its own words (taken from the CPS website), these tactics include:
- "Renegotiating existing contracts to secure additional savings wherever possible and systematically requiring cost transparency to find avenues for saving money;
- Creating increased competition by coordinating purchases with sister agencies to secure lower pricing; and
- Building stronger vendor relationships to further encourage cooperation in identifying smarter practices and cost efficiencies. As part of this strategy, CPS is personally meeting with its vendors to find 20 percent cost reduction within three years."
Please excuse us for being giddy, but given that our own property tax dollars are spent on education in Chicago (not to mention corporate and personal tax dollars), we're downright ecstatic to see language like this coming out of the city. But the specific categories strategies and are what really count, especially given how CPS is clearly investing the time not just to take the hammer to suppliers, but to discover joint cost take out opportunities in modifying specifications.
Examples (again, from the CPS site), include:
- "Custodial Services -- CPS savings is targeting approximately $3.5 million in FY 13 (a total of $7 million over the contractual year) as a result of communicating with the private vendor and learning that changing custodial work hours to evening means more efficiency and, in turn, cost savings.
- Electricity -- CPS is currently renegotiating its electricity contract which was set at a fixed rate two years ago when the market was much higher. By taking advantage of today's lower market price, targeted savings is more than $3 million for FY 13.
- IT Hardware -- CPS is expected to generate $1.5 million in significant savings of IT hardware such as computers in FY 13 by moving from two vendors to one vendor and bundling its purchase volume with that of City of Chicago sister agencies.
- Milk Purchase and Delivery -- CPS is saving $1 million by renegotiating a one-cent per carton price drop in its milk contract."
That milk contract is one that Peter Smith, our trusty UK/Europe Spend Matters MD, who is a Non-Executive Director of one of the UK's leading milk suppliers for schools, is likely to take note of. To which we would add the last line: when strategic sourcing hits schools, even the sacred cow's milk is not safe.