Big Lots Big Savings:

Transcription

1 Big Lots Big Savings: How They Found Additional Ways to Trim Costs (And Where They Found Them) Big Lots Craig Hart Vice President - Real Estate Administration LogicSource Sam Vail Managing Partner DENVER FALL 2014 SU MMIT

2 Evaluation How-to: Why? Your feedback drives SIG Event content By signing and submitting your evaluation, you are automatically entered into a prize drawing How? Option 1: App 1. Select Schedule 2. Select Schedule by Day 3. Select Day 4. Select Session 5. Scroll to Description 6. Click on the Evaluation link Option 2: Browser 1. Go to 2. Select Session (#20) DENVER FALL 2014 SU MMIT

3 What drove Big Lots to look for outside help in trimming costs. (And where we re finding it.)

4 + Founded in More than 38,000 associates + Headquartered in Columbus, OH + Five regional distribution centers with more than 9 million square feet of distribution capacity + More than 1,400 retail locations spanning 48 states + Revenues over $5 billion + Brand name products from 3,000 manufacturers

5 As North America's largest broadline closeout retailer, Big Lots has enjoyed phenomenal growth as a result of its power to negotiate the best deals in the business on merchandise.

6 Big Lots also has a good track record of effectively managing indirect spend. Our sourcing and procurement team had been steadily cutting costs for several years.

7 In came a new executive leadership team with a detailed strategic plan. Sourcing and procurement was compelled to seek additional efficiencies across the organization.

8 While our internal sourcing and procurement team is top-notch, there s only so much it can do in terms of overcoming issues like these: + Limited vendor pool + Limited buying leverage + Limited workforce flexibility + Decentralized indirect procurement capabilities

9 Limited vendor pool + Entrenched relationships with current vendors cause inertia + A time-pressed internal team lacks the bandwidth to complete the time-consuming tasks related to expanding the vendor pool: Identify possible alternate vendors Negotiate contracts Onboard new vendors

10 Limited buying leverage + A sourcing team that drives the best possible deal on this year s volume runs out of leverage next year if volume is the same or lower

11 Limited workforce flexibility + In-house subject matter expertise is limited to the people you have on staff or can justify hiring + Seasonality presents continuous staffing challenges year over year + Expertise you have leaves along with any employees who do

12 Decentralized indirect procurement capabilities As a result of different indirect spend categories being owned by different stakeholders at different locations, we lacked: + Centralized procurement data (transparency) + Domain expertise that could be easily accessed across the organization + Combined leverage across all categories

13 Looking outside for help didn t require us to look far.

14 LogicSource had already proven themselves in the Big Lots marketing department, where they: + Streamlined processes + Augmented the internal team + Expanded vendor pool + Increased buying leverage + Delivered significant savings

15 Sourcing and Procurement took a closer look at LogicSource and saw a three-part model we hadn t seen before. Strategy + Technology + Execution

16 Strategy + Because LogicSource executes on the strategies it develops, those strategies must be actionable and grounded in operational realities Technology + Proven, pre-built assets + They know what technology to bring in and how to apply it because they built it Execution + Only after LogicSource executes and we see savings does LogicSource get paid. We had true alignment excellent motivation to deliver promised results. And no upfront retainer meant nothing to lose

17 So we asked LogicSource what they could do for us. LogicSource performed a Mutual Value Assessment (MVA) on our in-store operations program.

18 The MVA focused on a portion of our total spend across eight primary categories: + Commercial Print + Store Fixtures + Gift Cards + Leasehold Improvement + Packaging + Paper + Signage + Supplies

19 Eight weeks later LogicSource came back with: + Evaluation of current processes, technology, suppliers, in-house and onsite resources + A detailed picture of the current program activity + Projected sustainable and measurable cost savings

20 Moved quickly to execution with a platform of proven, pre-built assets that includes: + Onsite team + Sourcing & Procurement Operations Center (SPOC) + OneMarket technology platform + Massive spend leverage

21 Where we are now.

22 Where We Started Out: + Limited vendor pool + Limited buying leverage + Limited workforce flexibility + Decentralized indirect procurement capabilities Where We Are Now: + Executing on the initial bids + Realized approximately 1/3 of the total projected savings so far as we work through the new contracts + Welcomed two new on-site employees hired by LogicSource and transferred an existing Big Lots associate to the new team + Looking at additional inhouse spend beyond the eight categories LogicSource evaluated

23 Where we re headed. Big Lots and LogicSource are in discussions about how to centralize and drive cost reductions in additional indirect procurement areas within instore operations.

24 LogicSource is currently performing an MVA on: + Waste management + Recycling + Coolers and freezers + LED lighting Other potential areas where we may engage with LogicSource: + Energy + IT + Security equipment and services

25 Craig Hart Vice President, Real Estate Administration Sam Vail Managing Partner

26 Session #20 Big Lots Big Savings: How They Found Additional Ways to Trim Costs (And Where They Found Them) Craig Hart Sam Vail DENVER FALL 2014 SU MMIT