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8 Procurement analytics use cases to meet the moment

The procurement function has evolved significantly over time. Modernity -- in the form of global supply chain expansion and advancements in technology -- has hastened the maturation of the procurement officer’s role from tactical to strategic.

With the expansion of global supply networks, procurement’s initial focus on tactical, day-to-day purchasing operations has broadened to include enterprise-scale strategy on topics ranging from risk mitigation to sustainable sourcing.

As stated by KPMG , “CEOs are looking to the procurement function to take on a broader and deeper set of strategic responsibilities than ever before.”

Procurement leaders are sought after to make decisions affecting many critical business processes.  Poor supplier performance or lengthy source-to-settle cycle times, for example, can have downstream impacts on revenue generation, profit margins, warehouse storage costs, and workforce hiring.

Deloitte’s Global 2021 Chief Procurement Officer Survey similarly acknowledges the increased expectations within the procurement role and suggests that “…building capabilities focused on agility is the CPOs’ best bet to meet and exceed them.”

Data analysis provides procurement professionals with the agility needed to meet these increased expectations. Using procurement analytics, executives can surface critical patterns from the vast data sets generated from purchasing transactions, delivery inspections, invoice processing, and more. This empowers procurement teams to isolate profitability drivers and eliminate bias when making purchasing decisions.

The use cases below detail specific examples of how organizations can implement procurement analytics solutions to drive efficiency, cost savings, and risk management decisions.

Accelerate procurement efficiency with analytics

“Driving organizational efficiency” was ranked by CPOs as the #1 business priority in Deloitte’s 2021 Global CPO Survey , surpassing “Cost Reduction” by a slim margin for the first time since the survey’s inception.

While cost reduction will assuredly remain a top benchmark by which procurement officers are assessed, there is a growing consensus building around additional areas of value influenced by the procurement department. According to Deloitte: “It’s no longer just about more products and services at a lower cost, but about a broader range of improvements (e.g., speed to market and innovation enablement) and in many cases ROI.”

Improve procure-to-pay cycle time

Inspecting aspects of the procure-to-pay cycle provides a better understanding of the procurement team’s performance. Benchmarks linked to revenue generation, such as speed of time to market, are influenced by the pace at which critical parts are secured. Source-to-settle cycle times impact the ability to meet demand at its peak or snag market share before competitors. For these reasons, procurement cycle time efficiency affects internal operations and alters the momentum of innovation.

Data comprising the procure-to-pay cycle comes from multiple different departments and is often siloed. Analytics allows procurement teams to connect workstreams and data across the entire enterprise to form an accurate representation of cycle times. The ability to break down a cycle time by its parts enables organizations to surface -- and triage -- operational bottlenecks that threaten to thwart productivity. Granular visibility into these processes would not be possible without analytics.

A detailed analysis goes beyond transactional reporting, allowing me to determine which teams or individual employees are prolonging the approval process. Quick access to this level of detail enables our organization to rectify the situation before we experience the rush of seasonal demand.

Analyze supplier performance to minimize disruption

Analytics makes it easier for procurement professionals to support peers’ revenue and profitability goals across the organization by providing process visibility.

Detailed analyses into delivery status and Advanced Ship Notice (ASN) by item type, project code, and other metrics allow companies to maximize productivity while proactively managing customer relationships. Teams can see which goods were ordered and their arrival date at a specific location. When analyzed against current warehouse inventory, organizations gain a complete understanding of their operations, and alert customers or downstream partners of possible delays in advance.

For instance, the manufacturing team’s productivity is hampered by the inability to see whether a critical part needed for production is located within a nearby warehouse, or whether it has been ordered at all. Inventory uncertainty creates idle time/downtime.

Within transactional reporting systems, supply and demand drivers are often kept in separate data repositories. Many employees can only view the inventory on-hand for their facility, rather than an aggregate view of inventory across the business. However, suppose the manufacturing team can see that an essential production part has been ordered, and will arrive at a nearby facility by Wednesday at 2 PM. In that case, they can begin a partial build on Monday. The team will then be well-positioned to continue work when the part is delivered later in the week. Analytics enables companies to bypass workflow interruptions while efficiently using time and resources.

Reduce bottlenecks within invoice and purchase order processing

The age-old adage “time is money” is one that operations and finance professionals alike are familiar with.

In general, the complexity of the process increases operational costs. Combining procurement and financial data for analysis is a crucial first step an organization can take towards streamlining excess logistical complexities across the procure-to-pay cycle.

Let’s imagine that I have direct access to a graph that depicts purchase order (PO) dollar amounts by supplier alongside the number of invoices received from each supplier.

 When the number of invoices issued by one supplier far surpasses the monetary amount on a contract, it's a good assumption that the supplier is invoicing my organization for each line item on the PO, rather than producing one blanket invoice. This creates additional work for the Accounting department and increases the risk of accidental late or missed payments for small amounts.

Armed with this knowledge, a category manager can create an improvement plan for this  supplier that includes invoice consolidation. Reducing the number of invoices processed streamlines accounting practices, and in turn, saves money in the form of labor hours.

Proactively manage procurement contract expirations

Procurement teams can more deftly navigate contract expirations with the aid of analytics. Tracking all agreements and contract expirations across global operations is a painstaking task that many companies face. Complexity is magnified when attempting to monitor multiple agreements with the same vendor across different categories and geographies. Different contract creation dates and varied category manager responsibilities for each contract add to the complication. It is not uncommon for procurement analysts to spend precious days painfully tracking these expirations by manually copying thousands of lines of contract information into spreadsheets… it’s no wonder accidental contract expiration occurs.

When contract expirations inadvertently slip through the cracks, it can prove a sore inconvenience to recreate the entire contract. This cumbersome process increases logistical processing time, and the renegotiation process always poses the threat of increased pricing terms. 

Analytics is a powerful antidote to these complexities. Receiving timely alerts 30, 60, or 90 days before contract expiration eases the mental burden of spreadsheet tracking for procurement officers. With an in-depth procurement analytics solution , users can visualize contract expiration by multiple dimensions, such as product type, country, supplier location, direct vs. indirect spend, and more. High-level analysis also allows procurement executives to track the overall contract execution roadmap from a workload and staffing level; how busy will my procurement officers be with the number of contract renegotiations coming up?

Deliver cost savings with procurement analytics

Despite increased demand for organizational efficiency, Chief Procurement Officers (CPOs) are most commonly held accountable to cost reduction metrics. The expectation remains that an increasing number of CEOs and CFOs will either begin to -- or continue to -- require CPOs to “deliver cost savings that are visible to the bottom line (with more robust tracking to prove it).”

For the procurement organization, the path to increased margins can be attained by various means, whether by negotiating more favorable pricing rates with suppliers or reducing contract leakage. The key to understanding where to reduce expenditures lies principally within an entity’s spend analysis solution ; it becomes nearly impossible to identify cost reduction opportunities without a comprehensive view of spend across the business.

Enhance strategic sourcing negotiations with spend analysis

Buyers and category managers are measured on savings negotiated and realized year-over-year (YoY). Yet without the right tools to measure and track progress, it can be an onerous task to track the company’s price negotiations over time for each supplier and every product managed.

For category managers entering renegotiations with past suppliers, the ability to easily see historical pricing trends for a particular product across all business units-- in addition to pricing received from competitors -- can serve as a benchmark for cost reduction.

Visualizing discounts received for a specific set of goods over time also allows the procurement organization to optimize negotiations. The procurement analytics dashboard below illustrates spend analysis information alongside “savings potential” by product and supplier.

With the right analytics tools, procurement teams can arm themselves with salient data points to improve their position during contract negotiations and can reduce off-contract spend on a granular level. 

Realize greater savings with Invoice Price Variance (IPV) Analysis

It is equally important to track negotiated pricing against invoice amounts to determine the organization’s realized savings. 

Negotiated discounts are meaningless if data from finance and procurement departments have not been synchronized to ensure that the rate negotiated matches the price paid. Getting these metrics is often time-intensive and complex due to the data integration and manipulation needed to combine outputs from different sources.

It is imperative to invest in procurement analytics software that makes this critical matching process easy. By speedily surfacing Invoice Price Variance (IPV) trends, companies can uncover instances of inadvertent overpayment. Perhaps one supplier, in particular, is guilty of making this error consistently -- once discovered, this becomes an easy fix with a phone call to their accounting department.

Reduce rogue spend with contract utilization and contract leakage analysis

Analysis of contract utilization and contract leakage by category, business unit, and item allows buyers to assess how well they’ve procured products and services that closely match business needs. Category managers can negotiate more favorable rates for items on an agreement, but this proves ineffective if employees ultimately purchase that item off-contract, or don’t use these products at all.

Let’s imagine that my top 10 items procured account for 90% of my utilization, and the rest of my items – 140 of them – are seldom being purchased. However, my off-contract spend for a similar category is very high. This is a clear signal to investigate this discrepancy further -- should I fold the off-contract items into my agreement for the next negotiation cycle? By looking at agreement utilization by item and supplier, buyers can more accurately predict the amount and type of goods needed, thereby reducing wasteful spending.

As pictured in the visualization above, agreement utilization analysis can help identify opportunities to realign agreements and contracts with purchase needs. Insights into agreement utilization trends can be used to increase spend under management. In the example above, the graph of “agreement amount” versus “agreement utilization” reveals that internal demand for silicon control sleeves from supplier Advanced Network Devices is far greater than demand for the same item from other suppliers. Procurement can use this information to shift future agreement amounts with each supplier to better align with company purchase preferences, thereby reducing rogue spend. 

Mitigate Procurement Risk

Full visibility into a company’s entire value chain can be elusive, yet transparency into supplier risk and performance is paramount when it comes to identifying unhealthy sourcing dependencies or mitigating unforeseen disruption. With the help of analytics, procurement professionals gain the tools to navigate the ever-looming threat of volatility.

“...most businesses do not have a good idea of what is going on lower down in their supply chains, where sub-tiers may play small but critical roles. That is also where most disruptions originate, but two-thirds of companies say they can’t confirm the business-continuity arrangements with their non-tier-one suppliers.” – McKinsey [link]

Reduce sourcing risks with increased insight into supplier performance

Lack of organization-wide knowledge of supplier performance trends permits low-performing suppliers and vendors to negatively impact downstream deliverables.

Analyzing spend data with supplier performance metrics enables organizations to understand the many tiers of their supply base and helps companies assess the potential for disruption stemming from each vendor.

“The ability to detect, measure, and manage risk remains a challenge...Our research found that very few CPOs (18%) were formally tracking the risks that existed in their direct (tier 1) supplier base, and only 15% had visibility beyond that.” -- Deloitte Global 2021 Chief Procurement Officer Survey

Knowledge of supplier performance by on-time delivery, accepted, rejected, shipped, short-closed, and return rates enables the optimization of purchasing and facilitates strategic supplier management.

For example, the visualization below demonstrates the benefit of viewing multiple supplier performance metrics together to get a comprehensive picture that is otherwise difficult to get through multiple separate reports. 

 Using analytics, a procurement team can determine the optimal supplier for critical project completion. By comparing suppliers according to delivery performance, quality, and spend amount, procurement officers can more fully understand where inherent risk lies. When faced with a tight timeline, the volume of rejected shipments by one vendor may outweigh the benefit of their lower-priced offering.  To avoid the risk of stock-outs, supplier diversification may be necessary.

Why procurement analytics from Oracle?

Whether pre-built via Fusion ERP Analytics or DIY using Oracle Analytics Cloud , Oracle provides comprehensive procurement analytics offerings. Within the procurement space, the automation of routine tasks has become table stakes, while a comprehensive understanding of spend and supplier risk provides companies with multiple paths to greater profitability.

At Oracle, we believe that technology solutions must rise to meet the new demands of the procurement role. Our cloud procurement and advanced analytics solutions have been built to facilitate strategic decision-making for procurement teams as they navigate complex supply chain challenges. To learn more about the benefits of procurement analytics, check out our latest product tour . 

Visit Oracle.com/analytics, and follow us on Twitter@OracleAnalytics and LinkedIn .

Roxanne Bradley

Product marketing manager.

The procurement function has evolved significantly over time. Modernity -- in the form of global supply chain expansion and advancements in technology -- has hastened the maturation of the procurement officer’s role from tactical to strategic.

With the expansion of global supply networks, procurement’s initial focus on tactical, day-to-day purchasing operations has broadened to include enterprise-scale strategy on topics ranging from risk mitigation to sustainable sourcing.

As stated by KPMG , “CEOs are looking to the procurement function to take on a broader and deeper set of strategic responsibilities than ever before.”

Procurement leaders are sought after to make decisions affecting many critical business processes.  Poor supplier performance or lengthy source-to-settle cycle times, for example, can have downstream impacts on revenue generation, profit margins, warehouse storage costs, and workforce hiring.

Deloitte’s Global 2021 Chief Procurement Officer Survey similarly acknowledges the increased expectations within the procurement role and suggests that “…building capabilities focused on agility is the CPOs’ best bet to meet and exceed them.”

“Driving organizational efficiency” was ranked by CPOs as the #1 business priority in Deloitte’s 2021 Global CPO Survey , surpassing “Cost Reduction” by a slim margin for the first time since the survey’s inception.

While cost reduction will assuredly remain a top benchmark by which procurement officers are assessed, there is a growing consensus building around additional areas of value influenced by the procurement department. According to Deloitte: “It’s no longer just about more products and services at a lower cost, but about a broader range of improvements (e.g., speed to market and innovation enablement) and in many cases ROI.”

Inspecting aspects of the procure-to-pay cycle provides a better understanding of the procurement team’s performance. Benchmarks linked to revenue generation, such as speed of time to market, are influenced by the pace at which critical parts are secured. Source-to-settle cycle times impact the ability to meet demand at its peak or snag market share before competitors. For these reasons, procurement cycle time efficiency affects internal operations and alters the momentum of innovation.

Analytics makes it easier for procurement professionals to support peers’ revenue and profitability goals across the organization by providing process visibility.

For instance, the manufacturing team’s productivity is hampered by the inability to see whether a critical part needed for production is located within a nearby warehouse, or whether it has been ordered at all. Inventory uncertainty creates idle time/downtime.

The age-old adage “time is money” is one that operations and finance professionals alike are familiar with.

Let’s imagine that I have direct access to a graph that depicts purchase order (PO) dollar amounts by supplier alongside the number of invoices received from each supplier.

 When the number of invoices issued by one supplier far surpasses the monetary amount on a contract, it's a good assumption that the supplier is invoicing my organization for each line item on the PO, rather than producing one blanket invoice. This creates additional work for the Accounting department and increases the risk of accidental late or missed payments for small amounts.

Armed with this knowledge, a category manager can create an improvement plan for this  supplier that includes invoice consolidation. Reducing the number of invoices processed streamlines accounting practices, and in turn, saves money in the form of labor hours.

Procurement teams can more deftly navigate contract expirations with the aid of analytics. Tracking all agreements and contract expirations across global operations is a painstaking task that many companies face. Complexity is magnified when attempting to monitor multiple agreements with the same vendor across different categories and geographies. Different contract creation dates and varied category manager responsibilities for each contract add to the complication. It is not uncommon for procurement analysts to spend precious days painfully tracking these expirations by manually copying thousands of lines of contract information into spreadsheets… it’s no wonder accidental contract expiration occurs.

When contract expirations inadvertently slip through the cracks, it can prove a sore inconvenience to recreate the entire contract. This cumbersome process increases logistical processing time, and the renegotiation process always poses the threat of increased pricing terms. 

Despite increased demand for organizational efficiency, Chief Procurement Officers (CPOs) are most commonly held accountable to cost reduction metrics. The expectation remains that an increasing number of CEOs and CFOs will either begin to -- or continue to -- require CPOs to “deliver cost savings that are visible to the bottom line (with more robust tracking to prove it).”

For the procurement organization, the path to increased margins can be attained by various means, whether by negotiating more favorable pricing rates with suppliers or reducing contract leakage. The key to understanding where to reduce expenditures lies principally within an entity’s spend analysis solution ; it becomes nearly impossible to identify cost reduction opportunities without a comprehensive view of spend across the business.

Buyers and category managers are measured on savings negotiated and realized year-over-year (YoY). Yet without the right tools to measure and track progress, it can be an onerous task to track the company’s price negotiations over time for each supplier and every product managed.

Visualizing discounts received for a specific set of goods over time also allows the procurement organization to optimize negotiations. The procurement analytics dashboard below illustrates spend analysis information alongside “savings potential” by product and supplier.

With the right analytics tools, procurement teams can arm themselves with salient data points to improve their position during contract negotiations and can reduce off-contract spend on a granular level. 

It is equally important to track negotiated pricing against invoice amounts to determine the organization’s realized savings. 

Analysis of contract utilization and contract leakage by category, business unit, and item allows buyers to assess how well they’ve procured products and services that closely match business needs. Category managers can negotiate more favorable rates for items on an agreement, but this proves ineffective if employees ultimately purchase that item off-contract, or don’t use these products at all.

Let’s imagine that my top 10 items procured account for 90% of my utilization, and the rest of my items – 140 of them – are seldom being purchased. However, my off-contract spend for a similar category is very high. This is a clear signal to investigate this discrepancy further -- should I fold the off-contract items into my agreement for the next negotiation cycle? By looking at agreement utilization by item and supplier, buyers can more accurately predict the amount and type of goods needed, thereby reducing wasteful spending.

As pictured in the visualization above, agreement utilization analysis can help identify opportunities to realign agreements and contracts with purchase needs. Insights into agreement utilization trends can be used to increase spend under management. In the example above, the graph of “agreement amount” versus “agreement utilization” reveals that internal demand for silicon control sleeves from supplier Advanced Network Devices is far greater than demand for the same item from other suppliers. Procurement can use this information to shift future agreement amounts with each supplier to better align with company purchase preferences, thereby reducing rogue spend. 

Full visibility into a company’s entire value chain can be elusive, yet transparency into supplier risk and performance is paramount when it comes to identifying unhealthy sourcing dependencies or mitigating unforeseen disruption. With the help of analytics, procurement professionals gain the tools to navigate the ever-looming threat of volatility.

“...most businesses do not have a good idea of what is going on lower down in their supply chains, where sub-tiers may play small but critical roles. That is also where most disruptions originate, but two-thirds of companies say they can’t confirm the business-continuity arrangements with their non-tier-one suppliers.” – McKinsey [link]

“The ability to detect, measure, and manage risk remains a challenge...Our research found that very few CPOs (18%) were formally tracking the risks that existed in their direct (tier 1) supplier base, and only 15% had visibility beyond that.” -- Deloitte Global 2021 Chief Procurement Officer Survey

For example, the visualization below demonstrates the benefit of viewing multiple supplier performance metrics together to get a comprehensive picture that is otherwise difficult to get through multiple separate reports. 

 Using analytics, a procurement team can determine the optimal supplier for critical project completion. By comparing suppliers according to delivery performance, quality, and spend amount, procurement officers can more fully understand where inherent risk lies. When faced with a tight timeline, the volume of rejected shipments by one vendor may outweigh the benefit of their lower-priced offering.  To avoid the risk of stock-outs, supplier diversification may be necessary.

At Oracle, we believe that technology solutions must rise to meet the new demands of the procurement role. Our cloud procurement and advanced analytics solutions have been built to facilitate strategic decision-making for procurement teams as they navigate complex supply chain challenges. To learn more about the benefits of procurement analytics, check out our latest product tour . 

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Procurement Strategy Case Studies — 5 Insightful Examples

Table of content

• InDemand’s co-creation model
• Copenhagen supplies seasonal and diverse organic fruit and vegetables
• Catalonia’s aim to clean air
• The Ministry of Defense of the Kingdom of the Netherlands procuring textiles
• Combining procurement models
• Procurement Expert’s Insights 
• Frequently Asked Questions
• Successful strategies depend on efficient coordination and collaboration between essential procurement players. 
• Aligning these strategies with broader procurement standards helps improve their lasting impact in the field and environment. 
• Knowing the factors affecting procurement strategizing helps build better procurement outcomes for the company.

Setting the appropriate strategy in procurement is the first step to improving control and effectiveness of the procurement and sourcing activities. However, not everyone knows where to start in their strategy. 

In this article, we will check five procurement strategy case studies that can give you insight into strategies they have used to streamline their processes. We will explore the problems that arise and how they have conquered them with their strategy. 

After reading this article, you will gain enough knowledge on tackling the problems in your procurement by formulating your very own strategy. So, I’d like to make your procurement process more effective than before!

Example 1 — InDemand, Co-creation Model Helping to Procure Innovation in Public Organizations

Actual case:.

InDemand brought together procurers from three different European Regions namely: Murcia, Oulu, and Paris to test a new co-creation model which is said to be a model that is faster, leaner, and requires fewer resources and overheads. Thus, being more suited to everchanging technologies, such as digital solutions. 

InDemand aims to help promote innovation by combining what the clients need (health professionals of the Murician Health Service), and the development of the solutions in the process of co-creation (a collaboration of health professionals together with tech companies). 

The Murician Health Service (EPICO), used the InDemand model to know the challenges of enhancing accessibility for and follow-up epileptic patients. Thus, a call to companies to co-create an innovative solution alongside clinicians commenced. 

After a tender process was launched, Oxiframe (renamed Aircrum IT) was selected to work together with neurologists and patients. After the engagement process, Servicio Murciano de Salud (SMS) prepared an open tender for a solution. Thus, a bigger company named PULSO won the bid and collaborated with Oxiframe to make an innovative solution. 

Final Deal:

The InDemand model has been leveraged to more than 50 procurement innovation projects. It is estimated that more than 200 organizations submitted a bid for the different calls based on the InDemand model from the numerous procurement organizations. 

Additionally, there was a 100% acceptance of the tool which was found to truly help improve communication between doctors and their patients affected by epilepsy. It has heightened patient satisfaction by up to 50% and led to a quality of life improvement for direct communication between doctors and their patients. 

After the success, it was then tested on 54 patients at the Hospital of Cartagena for 2 months and eventually tested on a wider group. Thus, it is a great example of how to use a co-creation model with companies together with clinicians and their patients. 

What Can We Learn From It?

We can learn here that demand-driven co-creation works, at least in the healthcare sector, to address the problems perceived by parties involved in the creation of a solution. 

Together with the clinicians and the patients, the collaboration worked well. The exchange of ideas, needs, solutions, standard practices, and legal limitations has become a valuable component to co-create an innovative solution. 

Example 2 — The City of Copenhagen Supplying Seasonal and Diverse Organic Fruit and Vegetables

Copenhagen, the most populous city of Denmark, has set a target for 90% of the food served in municipal facilities to be organic. It has also ensured that it was buying seasonal produce to support efforts of strengthening biodiversity in agricultural production in both Danish and foreign producers. 

It is important to note that “seasonality” is not meant to be the seasons in Denmark. Rather, it defines the season somewhere in the world helping to ensure fairness and transparency. 

Furthermore, an extensive market engagement was conducted to ensure the requirements were ambitious and also achievable. The bidders were also asked to complete the “seasonal wheels’ to demonstrate the varieties of the typically used products available throughout the year. 

The first contract was issued in January 2014. However, the tender was abandoned due to multiple errors seen in the bids. The contract was reissued in April 2014. Seven tenders were then submitted and only two of those met the requirements. After that, the contract was awarded in July 2014. 

The innovation in the supply and delivery of products, improved relationships with the suppliers, and greater sustainability initiatives in sourcing food were all positive results of the extensive market dialogue. 

Additionally, the organic food market in Denmark has remarkably grown in recent years and the organic food service market increased up to 33% between the years 2013 and 2014. 

We should take note that there is a risk in carrying out the innovation procurement process that is susceptible to being abandoned due to a lack of competition. The extensive market engagement Copenhagen has done can be time-consuming. 

However, by building a strong knowledge of the market, it is achievable to produce realistic yet innovative specifications or requirements to attract necessary competition. 

Example 3 — Catalonia’s Aim to Clean Air through Clean Vehicle Procurement

Catalonia is an autonomous region in Spain. Its government has passed the responsibility for certain legislative and policy areas, including the environment. The Ministry of Territory and Sustainability is the expert body for environmental policies and leads the promotion of Green Public Procurement in Catalonia. 

The Catalonia government uses GPP to support numerous strategic policies such as reducing negative impacts of consumption and production, promoting eco-innovation and transformation, and supporting other policies that pursue sustainable objectives. 

The government of Catalonia focuses on low-carbon vehicles that align with wider environmental priorities within the region. Air pollution is a specific concern within the wider urban area of Barcelona where nitrogen oxide exceeds the annual limit. 

An Air Quality Plan of the Metropolitan Area of Barcelona has brought 40 municipalities together to solve the air pollution problem. Catalonia’s Government approach to combat air pollution is to provide guidelines on the GPP vehicles, government agreements regarding GPP, eco-labeling to identify low-carbon vehicles and the LIVE platform which is a public-private platform promoting sustainable mobility. 

The GPP guidelines laid out clear and simple criteria that public procurers procurement can follow to buy low-emission vehicles, as well as consider the use of vehicle fleets in the delivery of service contracts. It also includes the maximum energy consumption and technical specifications of the award criteria. 

Additionally, the Catalonia government supports the Catalan Ecolabelling. It is a regional voluntary ecolabel awarded to products and services that fulfill specific environmental quality requirements beyond what is compulsory under the current regulations. 

The result of vehicle-related tenders in the Catalonia region has produced positive impacts on the environment. It is estimated that through its procurement strategy, it has produced energy savings of 2,120 Tons of Oil Equivalent (TOE) and a reduction of 7,166.7 tons of carbon emissions compared to benchmark levels. 

Catalonia’s government approach demonstrates that procurement can play a significant role in contributing to wider environmental policies and public health goals. 

Additionally, by aligning the EU national and regional policies, it is achievable to send a clear message to markets and the citizens of Catalonia about the importance of the environment through sustainable activities. 

Example 4 — The Ministry of Defense of the Kingdom of The Netherlands Procuring Textiles Made From Recycled Fibers

The Ministry of Defense of the Kingdom of the Netherlands (MODNL) is a large public sector buyer that employs around 58,000 people across the army, military police, air force, and other supporting roles. 

It is also one of the 45 public sectors and private parties brought together by the Dutch Government’s Circular Procurement Green Deal, tasking participants in carrying out two circular procurement initiatives between the years 2014 and 2016 to increase knowledge and accelerate the transition to a circular economy. 

One of the areas of focus of MODNL was textiles because it needed to equip its large numbers of personnel with uniforms and other textile products. However, textile production is linked with numerous environmental and social problems. Ultimately, the energy to transform raw materials and manufacture new fibers in the production of textiles has great carbon emissions. 

Therefore, the MODNL began exploring the market for recycled textiles in January 2014 by publishing a request for information and conducting an open meeting with the textile suppliers. This market engagement aimed to know if it is possible to require recycled fibers to be used in the production of certain items. 

Through its market research , it identified that manufacturers were able to meet the requirements around the use of recycled content. However, MODNL must focus on the items’ ability to perform their use rather than the technical values such as the tensile strength. 

The contracts awarded in June 2016 are worth approximately $455,000 for towels and washcloths and $1.46 million for overalls. Only six suppliers submitted their bids and only four of them met the tender requirements. 

Now, two Belgian companies supply the MODNL with towels, washcloths, and overalls. The parties will innovate during the four-year term which could result in a higher percentage of recycled materials later on in the execution of the contract.

Subsequently, a separate eight-year contract was also signed for reuse services where a third party was contracted to sort items of clothing for reuse and resale with income being returned to MODNL. Thus, it results in considerable savings for the MODNL.  

Circular procurement needs suppliers to find alternative inputs and new ways of working. Thus, to assist innovation, the market engagement conducted by the MODNL found that functional rather than technical specifications provided suppliers with more space to innovate and find new ways to meet the MODNL’s material needs. 

We can learn here that when asking the market to work with new materials or in an innovative way, it is necessary to give them more lead-in and response time to consider and prepare non-traditional offers. 

Moreover, it is important to take note that you should not introduce price ceilings based on existing prices, and costs, as expected on a pilot test, can constrain the development potential of new areas. 

Example 5 — Combining Procurement Model For Sustainable Buildings

The South Moravian Region has over a million inhabitants and is the fourth-largest region in the Czech Republic. The landscape of the region is distinguished by its highlands as well as the Moravian Karst. The abundance of caves and gorges provides ideal conditions to treat respiratory diseases. 

The regional government aims to build a new treatment facility for respiratory diseases near the town of Ostrov u Macochy. The procurement approach was set up to give the market the chance to show the best they can offer to create the building as aesthetically pleasing, energy-efficient, and a comfortable place for patients. 

The process includes preliminary consultation and market dialogue to test the feasibility of the procedure and to provide a detailed description of the planned procurement process and requirements of the tenders. 

Furthermore, the procurement procedure combined various methods to filter the bids. The tender itself was awarded using a combination of a competitive procedure with negotiation and an architectural design contest. 

The preparation of the tender process started in April 2018 and the procurement commenced in April 2019 with a total contract value of $6 million. 

Seven suppliers submitted their bids which were to be assessed by an expert independent evaluation committee that recommended the exclusion of one supplier due to flaws in its bid. 

The remaining were then evaluated according to set criteria which are based on the reports of the expert examiners who examined in detail the values offered in the quality of technological and energy solution criteria. 

The contract was awarded to the selected contractor in April 2020. Since then, the construction started in June 2021 and is expected to be done by the end of 2022.

The winning bidder offered numerous sustainable solutions including reusable components of the main construction and interior design layout that enables simple layout adjustments that may be done in the future. The successful bidder also committed to achieving a reduction in the annual consumption of non-renewable primary energy. 

We can learn here that preliminary market consultations are crucial when the contracting authority undertakes a new approach to procurement. Additionally, it is important to present the intentions and goals to potential suppliers, get feedback from the market, and find other information significant to prepare the procurement process. 

All parties involved in the preparation of the actual procurement process were sent a request to identify the strengths and weaknesses of the procurement process they utilized. 

Using the BIM method leads to better execution and more efficient operation of the building. Furthermore, as the tender used numerous methods, it is significant to see the effectiveness of the DB approach as it can be an interesting and legitimate way for contractors to implement large-scale projects. 

Procurement Expert’s Insights on Procurement Strategy Case studies

For this article, we asked an experienced procurement expert to share her insights to help answer common questions about case studies regarding procurement strategy.

Nesrin Chabbah Senior Lead Buyer

LinkedIn Profile: linkedin.com/in/nesrin-chabbeh

1. What do most people get wrong about procurement strategy case studies?

“What’s commonly misconceived about procurement strategy, as evident in the given cases, is its potential to profoundly influence organizational objectives beyond mere acquisition efficiency. Procurement transcends simple procurement; it’s a strategic instrument capable of propelling innovation, sustainability, and social advancements. These examples underscore how procurement, when meticulously strategized and implemented, can yield positive effects not just on operational efficiency but also on the environment, public health, and society at large. It involves harmonizing procurement with grander visions and engaging stakeholders for impactful results.”

2. What should people know about procurement strategies if they are planning to start working on this?

“For those embarking on the journey of devising procurement strategies, understanding that it’s not merely about obtaining goods and services is pivotal. Procurement strategy extends to shaping innovation, sustainability, and social responsibility. Effective strategies align with broader organizational goals, incorporating sustainability, ethical sourcing, and fostering supplier relationships. Engaging stakeholders and fostering transparency is vital for success. Moreover, the ability to adapt strategies to emerging technologies and market shifts is essential for staying competitive and achieving long-term success in procurement.”

3. From your experience, what is the most important thing you learned about procurement strategy case studies?

“The core lesson in mastering procurement strategy is understanding its dynamic and multifaceted nature. It extends beyond the efficient acquisition of goods and services; it encompasses supply chain optimization, innovation encouragement, sustainable practices, and fostering strong supplier relationships. Crafting an effective strategy demands comprehensive knowledge of market dynamics, legal considerations, risk mitigation, and emerging technologies. Flexibility and adaptability are paramount, as strategies must evolve in response to evolving business landscapes and shifting consumer demands. Ultimately, a well-crafted procurement strategy profoundly influences an organization’s overall performance and its capacity to meet objectives both effectively and responsibly.”

4. What tips can you give them to be effective in procurement strategies?

“To ensure an effective procurement strategy, it’s crucial to align with organizational objectives and understand needs and goals thoroughly. Employ data-driven decision-making, leveraging insights for optimal choices. Prioritize risk management by identifying and mitigating potential supply chain risks. Cultivate strong, transparent relationships with suppliers, adhering to compliance and ethical standards. Foster a culture of continuous improvement, integrating sustainability practices, and optimizing costs through strategic negotiations. Maintain clear communication channels and invest in team training for skill development. Regularly measure performance and adaptability, embracing change as a part of the process. By following these guidelines, you can enhance your procurement strategy and achieve better outcomes.”

5. Can you give us examples of procurement strategy challenges and how you solved them?

“Monitoring supplier performance and their resilience posed significant challenges. However, implementing Key Performance Indicators (KPIs), conducting monthly meetings, improving communication, and setting clear goals engaged suppliers, fostering responsibility and driving them to deliver their optimal results.”

The five insightful procurement strategy case studies offer valuable lessons for organizations seeking to enhance their procurement processes.

These case studies emphasize the importance of understanding market dynamics, engaging stakeholders, aligning procurement with broader policy objectives, and fostering innovation through collaboration.

By drawing insights from these examples, organizations can tailor their procurement strategies to address specific challenges and achieve more effective and sustainable outcomes.

Frequently asked questions

What is a procurement strategy case study.

A procurement strategy case study is a real-world example of how organizations buy things, showing the challenges and choices they face.

What types of procurement strategies are commonly explored in case studies?

Case studies may cover a range of procurement strategies, including strategic sourcing, supplier relationship management, e-procurement, cost optimization, and sustainability initiatives.

What can organizations learn from mistakes in case studies?

Case studies highlight mistakes made by others, offering useful insights into what went wrong and how to avoid similar issues for better outcomes.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

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A comprehensive guide showing how data is used in procurement. This guide covers how procurement data can be extracted, refined, and analyzed for actionable insights and value.

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Updated: May 3, 2024

Procurement analytics is the process of collecting and analyzing procurement data for business insights and effective decision-making. 

Procurement analytics typically involves collecting data from various source systems and ERPs. Data is then classified into standard or use-case-specific taxonomies. After classification, the data is presented in a visualization dashboard or within business intelligence tools.

Examples range from historic procurement spend analysis reports to advanced analytics which inform future budgeting decisions.

The need for procurement analytics has developed from the desire to get a consolidated view of procurement spend. Over the years, it has developed from one-off projects like spend cubes to cover a number of specialized solutions, dashboards, and types of automation software.

In this guide, we'll cover the basics of how procurement analytics can be applied in your organization. We'll give you insights into use cases, KPIs, how procurement analytics is built, and how to choose a solution. Enjoy! 

Benefits of Procurement Analytics

Procurement analytics is not only for procurement. It provides value to the whole organization. All other functions, from marketing to finance, can benefit from procurement data and its broad range of insights.

In procurement analytics, value comes from more timely, accurate, and actionable business insights. Also, good analytics empowers procurement's ability to measure contribution to the bottom line.

Procurement organizations can utilize analytics to describe, predict or improve business performance. It can enable effective and data-driven decision-making. Automation of repetitive tasks in procurement leaves more time and focus for strategic decision-making and relationship management.

Procurement analytics can be used in resource management, strategy planning, market research, and business development.

There is a wide array of opportunities for the organization:

Improving forecasting and budget management.

Improving risk mitigation and disruption management.

Gaining insights into quality management and performance development.

Benchmarking performance on category, unit, and country levels.

Discovering opportunities for consolidation, prioritization, and focus.

Types of Procurement Analysis

The field of procurement analytics has emerged from the need to understand past performance and guide future decision-making. Common types of analysis in procurement include:

Descriptive Analytics – where procurement data is analyzed to describe what has happened in the past.

Diagnostic Analytics – where procurement data is interpreted to understand why something has happened in the past.

Predictive Analytics – where trends and patterns in data are used to forecast future procurement performance.

Prescriptive Analytics – where predictive models based on procurement data aid decision-making.

Historically, procurement analytics has focused on understanding past procurement spend and supplier performance, but increasingly focus is shifting toward automated and prescriptive decision-making.

Over time, the functionality and service models of spend analysis solutions have evolved to meet the growing needs of procurement organizations facing digital transformation.

A broad field of spend analysis solutions has emerged to serve different needs and maturity levels. There are four generations of procurement analysis solutions.

Generation 1 (1990 – 2000): analysis done in Microsoft Excel by consultants or business analysts with focus on past spend analysis.

Generation 2 (2000 – 2010): desktop spend analysis software bought under license with data hosted on-premise or within the company firewall.

Generation 3 (2010 – 2015): browser-based spend analytics dashboards providing business intelligence level visualizations and usability. Licensed or bought as a Software-as-a-Service.

Generation 4 (2015 – today): AI-powered, automated procurement analytics solutions combining many data sources. Encrypted and hosted on the cloud. Bought as Software-as-a-Service.

Different generations of solutions co-exist to meet the needs of different types of businesses. Some procurement organizations retain their Excel-based reporting, while others may continue to use their self-built or configured business intelligence solutions long into the new decade.

But we view analytics as much more than data visualization. It's about collecting, cleansing, and enriching large amounts of data to from disparate systems and external sources to create a "procurement information hub." This single source of truth can enable you to uncover insights that lead to action.

Sources of Procurement Data

Procurement organizations often face the challenge of heterogeneous data landscapes. As many businesses are formed from more than one business unit, financial processes may vary on a regional or international basis or across businesses.

Increasingly, procurement analysts are starting to leverage data from outside of their own procurement organizations, combining the most valuable aspects of internal and external data.

Internal data assets are hosted or originated within corporate applications. It is common for businesses to utilize more than one transactional database, such as enterprise planning systems (ERPs) or accounting software. Procurement analysts may also utilize data provided directly by suppliers or different business units through Excel or tap into data from the general ledger or other financial records.

External data assets are any data sources that come from outside of the company's own financial databases. These may be public systems, such as information on suppliers, commodity prices, or currencies readily available on the Internet. External data sources also include 3rd party proprietary sources, such as supplier industry codes, credit ratings, or supplier risk profiles.

In the past, independent analysts working with Excel have been limited in the ability to utilize external data sources. Cloud-based procurement analytics software and application programming interfaces (APIs) have enabled more automated, faster, and more flexible uses of procurement data.

Examples of analytics in procurement

Across different procurement organizations, there may be different applications of procurement analytics.

Some of the most common examples include:

Spend analytics: the analysis of procurement spend data from internal or external data sources. Invoice analytics: the analysis of invoice data and payment cycles from internal or external data sources. Purchase order analytics: the analysis of purchase order (PO) coverage, maverick spend, and PO cycle times from internal or external data sources. Payment term analytics: analysis used to identify and act on working capital improvement opportunities. Supplier analytics: the analysis of individual suppliers’ performance, comparison of supplier performance, analysis of supplier risk, sustainability or diversity, or analysis of supplier base. Diversity analytics: the analysis of social responsibility and diversity in the supply base, on category and individual supplier level. Sustainability analytics: the analysis of Environmental, Labor & Human Rights, Ethics, and Sustainable Procurement targets from your supply chain. Supplier risk analytics: analysis of external risk factors negatively impacting your supply chain. Contract analytics: the analysis of supplier contracts and their meta-data, such as payment terms and expiration dates. Market benchmarking: assess risk and discover opportunities by benchmarking your purchase prices against market price development. Savings lifecycle analytics: the analysis of savings projects and their impact on the financial bottom-line. CO2 analytics: the analysis of scope 1, scope 2, and scope 3 emissions. Spend forecasting: the forward-looking analysis of procurement spend data and its impact on profitability.

Use cases of procurement analytics

A common misconception is that analytics in procurement only relates to spend analysis.

In reality, analytics touches all activities from strategic sourcing to category management and procure-to-pay processes.

Here are just some key reasons why analytics is important across different procurement functions.

Analytics in category management

When effectively used, analytics give category managers superpowers. Procurement analytics allows category managers to identify savings opportunities, segment and prioritize suppliers, identify sourcing potential, address supply risk opportunities, manage sustainability performance, develop supplier relationships and facilitate innovation.

Blog: Introduction to category management | Definitions and best practices

Analytics in strategic sourcing

The best business strategies are informed by data. In strategic sourcing, analytics helps identify the best times and areas to run sourcing events and requests for proposals. It can identify which suppliers to include in sourcing projects and provide rich information into suppliers’ quality and risk positions.

Blog: Leveraging spend analytics in strategic sourcing

Analytics in contract management

Analytics provide value across contract lifecycle management. It can alert when contracts need to be renegotiated or provide data for supplier negotiations. What’s more, analytics can identify maverick spend to help compliance and improve contract coverage.

Blog: 7 tips to reduce maverick spend in procurement

Analytics in source-to-pay (S2P) process

Procurement analytics can also provide much value in the transactional side of procurement. With analytics, you can measure purchase order cycles and improve payment terms. You can evaluate payment accuracy, discover rebate opportunities, identify mistaken payments, and reduce fraud.

Blog: How PO analytics fuel P2P performance: insights from a best-of-breed

Analytics in sustainability and corporate social responsibility (CSR)

Increasingly, companies are realizing the value of analytics in assessing sustainability and CSR and related risk within the supply chain and procurement. Analytics can uncover the environmental or social impact of procurement decisions and identify opportunities for more sustainable alternatives.

Blog: What is sustainable procurement and why is it important?

Analytics in risk management

Analytics can aide in identifying and mitigating risk within the supply chain and procurement. Analytics can unravel the complex relationships between supply, price, the environment, CSR initiatives, and risk, while identifying opportunities for mitigation.

Blog: 3 ways to tackle commodity price fluctuations and volatility

Analytics in performance measurement

Procurement analytics is classically used to identify savings realized, which is directly relevant for profit and loss (P&L) reporting for finance.

Blog: Everything you need to know about Procurement savings

Business Cases for Procurement Analytics

Procurement analytics has the potential to improve operational efficiency across the entire sourcing and supplier management lifecycle. Common business objectives for procurement analytics include:

Cost reduction – identification of savings opportunities and measuring savings projects' impact on the financial bottom-line.

Corporate responsibility - identification of opportunities for social responsibility, increased diversity and emission reduction in the supply base.

Risk management – identification, measurement, and mitigation of supplier or market risks within procurement operations.

Sourcing opportunity identification – explorations of new or more strategic ways to manage and consolidate suppliers or categories based on historic procurement data.

Cash flow improvement – highlight ways to improve operational cash flow, for example, through payment term optimization or currency rate optimization.

Business opportunities - identification of opportunities, new market areas, business insights and product/service development potential based on procurement data, external data and spend trends.

Many organizations recognize that procurement is a critical business contributor. Typically 40 – 70% of all costs are procurement-related, and these costs are often a volatile source of competitive advantage.

Effective organizations leverage data to more effectively manage supplier relationships, and growth and even bring new innovations to life.

More data has been created in the last two years than in the previous history of mankind, bringing new challenges for procurement analytics. Advancing analytical technologies accelerate the process from data to insights and unlock new opportunities.

Assessing the need for analytics

The common goal of most procurement analysis solutions is to be a ‘single source of truth’ where procurement teams can make informed decisions with data they can trust.

If the data is not reliable, you may run into a “bad data in, bad data out” situation, where costly mistakes are made based on unreliable analysis.

While most procurement organizations have similar aims for reliable data visibility, they all have unique resources and challenges to achieve the goal.

You can assess the complexity of your needs on four key dimensions:

Connectivity - do you need to bring together multiple sources of data from within and outside of your procurement organization?

Adaptability - can the solution fit into your team’s sourcing processes, culture, organization structure and workflows?

Transparency - do you need to see and understand how spend is organized? Can you trust the data?

Speed - how often do you require updated analysis and how actively is it used in your organization?

As a rule of thumb, the higher your needs for connectivity, adaptability, transparency, and speed (or CATS) the more likely you are to need procurement analytics.

If you don’t require many connections between different source systems and a high level of transparency in the analysis process, you may be able to start with a one-time analysis done in Excel or with help from a consulting partner.

If you have a complex organization or global supplier networks, or you require regularly updated data, you may benefit from dedicated procurement analytics software.

Procurement KPIs and Metrics

Procurement metrics or key performance indicators (KPIs) provide organizations with quantifiable values to measure performance and guide procurement strategies. Metrics can also be used to benchmark procurement’s performance to peers or to prove contribution to company-wide goals and targets.

One challenge with procurement metrics is that they may be used inconsistently within a procurement organization or have different meanings for key stakeholders such as finance. Here is a quick reference to some of the key metrics you can measure.

1. Spend under management

Spend under management is the total amount of spend that is actively managed by the procurement organization. This figure can include every region and category that procurement is working with, or can be divided into separate metrics that represent a specific region or category.

Spend under management is an important metric for a procurement organization because it reflects maturity and control over spend.

2. Spend vs. budget

Spend vs. budget tracks the realization of spend in procurement and compares it to the budgeted spend overall or per business unit.

Tracking realized spend against budgets is the foundation of spend management and ensures alignment with key stakeholders such as finance.

When evaluating spend vs. budget, success is not necessarily measured by a decrease in cost but by budgeting accuracy.

3. Total cost of ownership

Total cost of ownership (TCO) is the cumulative cost of all spend purchases. TCO takes into account every cost that is incurred during the procurement phase and includes all direct and indirect costs of a product or system.

It’s not limited to just the purchase price but includes transaction fees, warehousing, and other incidental costs.

TCO is a valuable metric for procurement because it provides a cost basis for the total economic value of an investment.

4. Cost Savings

Cost savings is measured by the cumulative amount of savings gained. These are then broken down by category for focused measurement. They are followed over a time period to see how cost-saving targets are met.

Cost savings could be achieved through aggregating spend across business units, taking out longer-term contracts or introducing more competition, ordering in larger quantities, implementing vendor-managed inventory systems, standardizing and rationalizing the spend, or using combinations of these different levers.

5. Cost avoidance

Cost avoidance is used to describe any actions that help a company avoid absorbing inevitable additional costs.

These costs could be due to inflation, shorter payment terms, exchange rate fluctuations, requirements for additional features or services, etc.

Negotiating with cost avoidance measures helps in keeping future costs down. Cost avoidance will not be reflected in budget or financial statements but can be used as a measure of procurement performance.

6. Average payment terms

Average payment terms measure the average time (in days) invoices are paid, calculated using every single instance of payment term information. Improving or harmonizing payment terms among and within suppliers is a key way of improving working capital.

While the improvement in working capital will not be reflected in financial statements, you can calculate savings based on proxies such as the cost of borrowing. 

7. Number of suppliers

The number of suppliers informs how many distinct suppliers are being utilized in the procurement organization or in a specific category.

Reducing the number of overlapping suppliers in a category can result in efficiencies or cost savings. Increasing the number of suppliers in key categories may be advantageous to reduce supply risk.

8. Contract coverage

Contract coverage measures the amount of spend that is covered by a contract. In contrast, maverick buying highlights the possible loss of value that occurs when buying off-contract.

Increasing the amount of spend that is covered by contracts (or procurement-approved purchase orders) can result in savings while also reducing compliance risk.

9. Exchange rate exposure

Exchange rate exposure measures the changes currency fluctuations and conversions have on the overall spend.

The long-term impact of exchange rates can be measured and isolated from realized savings measurement. 

10. Vendor accountability

Vendor accountability measures suppliers’ performance and how they are responsible for handling errors and claims. Examples of vendor performance measurement include defect rate, lead time, and the cumulative amount of incidents per supplier.

The goal of vendor accountability is to ensure that the overall best product or service is delivered, and the development of more strategic supplier relationships.

Once you’ve identified your key procurement metrics it’s time to develop a procurement performance dashboard. One method to utilize procurement metrics is through a balanced scorecard.

Balanced Scorecard for Procurement

A balanced scorecard is a strategic performance management framework to identify and improve various functions including financial and non-financial metrics developed by Robert S. Kaplan and Dave P. Norton.

For procurement, a balanced scorecard helps managers and teams keep track of the execution of activities and the consequences arising from these actions.

While there are some industry-level best practices, each company is likely to have its own scorecard of metrics related to its own business goals. In the balanced scorecard model the key focus areas to include are:

Financial Perspective – a small number of high-level key financial measures for the procurement organization that can be tracked and reported in a way recognized by finance.

Customer Perspective – while procurement doesn’t typically have external customers, this could include measures of customer satisfaction or responsiveness to internal stakeholders.

Learning and Growth – assessment and measures of the skills within the procurement organization and how new talents are brought in and retained in the organization.

Internal Processes – measures of the efficiency of the procurement organization. How quickly and accurately tasks are done and how they can be streamlined or automated.

Setting up metrics can be difficult, as the amount of information provided has grown over the years. Some procurement organizations highlight metrics with no actionable value. 

Another mistake in performance management is having too many metrics in place. Too many trackable items can be detrimental as it leads to overanalysis. Overanalysis can lead to loss of meaningful performance, as there is a lack of an overall vision and too much focus on tracking individual metrics rather than working on what will drive improvement in the big picture.

The most important element of any procurement scorecard is clear and realistic targets. In other words, not just measuring specific metrics but developing clear goals for where each metric should be headed. It is a good practice to have ambitious goals, but unrealistic goals may demotivate the procurement organization and hurt the business.

Procurement Analytics solutions provide ready-made templates to track procurement metrics and develop procurement scorecards.

Procurement Analytics Solutions

With the increased availability of business intelligence (BI) and cloud computing technology, there has been an increase in procurement analysis solutions.

Most procurement organizations are faced with the common “build or buy” dilemma. On one hand, you can choose to build your own reporting system in either Excel or a BI platform like PowerBI or Tableau. Alternatively, you can choose to buy dedicated procurement analytics software.

Let’s go through the benefits and limitations of each option.

Business Spend Intelligence

Business Spend Intelligence (BSI) is the process of statistical procurement spend analysis to support executives in making informed business decisions. Often led by data scientists or analysts, the process involves data mining, data visualization, and reporting.

Spend Cubes are a common example of business spend intelligence, where data is presented across three axes to answer three key questions for procurement: who is buying, what is being bought, and who is bought from.

BSI can be delivered either by specialized consultants, a centralized BI function, or by analysts within the procurement organization and is typically seen as a one-off exercise conducted in Excel or as continuous reporting within a BSI tool.

Example: Procurement analysis dashboard in Microsoft PowerBI, Source: Microsoft, 2022

Key benefits : relatively cost-effective way to give executives a view on procurement spend. Can be aligned with the reporting needs of wider procurement organizations or other functions.

Key challenges : data is often out-of-date when analyzed. May require advanced analytics skills or dedicated data scientists. Can be challenging to maintain or refresh. Data re-classification or data validation may require regular manual work.

Procurement Analytics Software

Compared to self-made business spend intelligence reporting solutions, procurement analytics is often seen as a continuous activity where data is used to influence key procurement goals or strategies.

Procurement analytics is not limited to past spend data. Instead of reactive reporting, procurement analytics involves the discovery, interpretation, and communication of meaningful patterns in procurement data. Analytics can be embraced by different roles within procurement organizations from category managers and analysts to C-level executives.

Example of Sievo procurement analytics software

Key benefits : a continuous process where data is refreshed and used to identify new opportunities across the procurement organization. Can be configured to include many sources of relevant data (not just past spend reporting). Read the 7 benefits of Procurement Analytics.

Key challenges : can be more costly to implement than one-off reporting, especially as procurement may not have an earmarked analytics software budget. May require training to build a culture of analytics in procurement organizations.

Three Steps of Procurement Analytics

Procurement analytics brings visibility into spend and supplier performance and helps un-tap potential savings and opportunities. Even though spend data already exists in systems, making sense of it is often far from straightforward.

Here are the 3 general steps that take procurement data from source to screen.

1. Data Extraction

It starts with extracting the data from all possible sources and consolidating it into one central database. Once it gets extracted, data is ready to be enriched and cleansed.

Data extraction is the process that takes outdated and messy sources of information into a clean and consolidated format that can be easily understood and is ready for analysis.

In many large companies, data extraction is a challenging task that requires significant human and capital investments. On top of that, most software systems weren’t built for the intensive load an extraction will put on them, especially internal databases that need to continue serving users during the data pull.

Because of the unexpected amount of stress put on the servers, considerable performance problems can occur during the process. The amount of data to extract and the amount of maintenance required may result in longer than expected lead times for data extraction.

Pulling large amounts of data out of a myriad of sources without a standard interface can be quite a tedious task.

At Sievo, we’ve built our own automated data extractor capable of collecting data from over 100 different source systems. The Sievo Data Extractor is designed to connect and extract the most complicated and extensive procurement data from all kinds of data sources and deliver it for further analytical processing.

Here are Sievo Data Extractor’s five key strengths:

1. Speed through automation:  Sievo’s Data Extractor has a pre-configured template for extraction to take the correct data, as well as the possibility for additional data fields. The tool significantly cuts down the amount of time and effort needed, including the number of people that need to be involved in the process. 

2. Data security:  Sievo Data Extractor represents an easy way to extract data from multiple systems with complete data security. Companies understandably want to have full control over sensitive data, and this tool guarantees a secure way of extracting data and delivering it for further processing with the possibility for customers to still keep control.

3. Quick installation:  Installed to a client’s computer within minutes and compatible with practically any ERP, procurement, or finance system, Sievo Data Extractor seamlessly captures all the data needed and pushes it to the Sievo cloud. 

4. Reliable monitoring:  The tool allows us to monitor all processes in case of exceptions. We’ve learned through experience how to react to errors such as connections not working or only partial data sets getting extracted. 

5. Data cleansing: After the transformation logic, what you’re left with is a clean, consolidated, and filtered format which then makes the rest of the process easier and faster.

Read more about Sievo Data Extractor and other Integrations

2. Data cleansing, categorization, and enrichment

Next, data has to be classified into clear and defined categories. To make spend analysis effective, precise data classification is needed, as it makes the heterogeneous spend data easier to address and manage across the organization.

This process harmonizes all purchasing transactions to a single taxonomy in order to enable customers to gain visibility on their global spending. In this step, data can also be enriched through automated translations or supplier consolidation.

Classification is about harmonizing all purchasing transactions to a single taxonomy, enabling customers to gain visibility of their global spending in order to make better sourcing decisions.

Effective procurement analytics is not possible without precise data classification. Without classification, everything is cluttered and unorganized.

Unifying heterogeneous spend data into clearly defined categories makes them easier to address and manage across the whole organization.

Complex data classification solutions are not always simple to implement, but they can be improved over time.

Sievo’s collaborative classification engine is not a black box—it is transparent. The visibility for customers makes the whole process collaborative, as the customers can freely participate and make exceptions if necessary. Once classified, the information goes standard across the organization and users can see what data characteristics the classification has been based on.

Our approach includes human + machine collaboration, where the advanced knowledge of procurement experts is complemented by our own proprietary machine learning solutions. In practice, we continuously train computers to learn and adapt the classification techniques performed by humans. The more data computers see classified, the more they learn. 

Learn more about Sievo's process of classifying and enriching your data

3. Reporting and analysis

After the data has been classified, it is now ready to be analyzed. The possibilities of insights are vast. However, the most logical next step is to perform spend analysis.

Spend analysis   is the practice of analyzing procurement spend to decrease costs, increase efficiency, or improve supplier relationships.

Possible types of insights can relate to:

Supplier segmentation across dimensions like geography, strategic relevance, spend, and delivery performance.

Category analysis to review spending or supplier trends over time or to identify new opportunities to improve category performance.

Overview of how your spend is performing compared to other points in time, such as last year, last quarter, and so on.

Spend Analysis gives you the needed spend visibility to deliver insightful analysis for accelerated opportunity identification, smarter sourcing decisions, and full control of your spending. 

The principle of Source-to-Screen analytics is a smooth data journey that surfaces actionable insights.  Like the iceberg metaphor, most procurement insights are hiding beneath the surface.   

Evaluating Procurement Analytics software

Each procurement organization has its own way to evaluate and choose new software partners. There is no silver bullet to finding the right partner, but these common best practices can help in the process:

Go beyond data categorization – in the past, analytics vendor evaluations focused greatly on spend classification and master data management. These are important but today, data quality should be an enabler to more strategic insights.

Look for transparency – effective procurement leaders need to see the big picture but also drill down to details when needed. Analytics solutions should allow for configurable dashboards and provide data transparency all the way down to the transaction level.

Exploit relevant expertise – while each procurement analytics case is unique, specialist analytics vendors will have years of experience to share from similar customers or industry cases. Check for relevant customer references and look for a vendor that can guide you to the right solution.

Involve key stakeholders early – increasingly, procurement analytics has benefits for different stakeholders outside of procurement from corporate risk management to financial and strategic planning. If alignment with other departments like Finance, IT, and legal is important, include them early in the evaluation process.

The total cost of ownership (TCO) for an analytics solution can be divided into 3 main elements:

Acquisition and development cost: the costs related to the acquisition, maintenance, and development of a software solution, as well as their inherent opportunity costs.

User experience and functionality: the costs related to the training, onboarding, and support of users and the impact on productivity.

Data management and quality: the costs related to the long-term management of data, including data architecture, data quality, and data security.

All of the elements of TCO should be considered in the evaluation of the procurement analytics solution and partners. 

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We are the procurement analytics solution for data-driven enterprises. 

We give procurement, finance and leadership teams a single source of truth and radical transparency to all sourcing decisions. Our solution helps you choose the right suppliers, deliver savings and manage compliance with confidence. Not only that, we enable a sustainable, diverse and resilient supply base.

We master the art of extracting, classifying and enriching data across all ERPs, procurement systems and external data sources, saving your valuable time.

Simply put, we’re  pretty damn  good at turning even the crappiest data into actionable insights!

We’ve pushed the boundaries of spend analytics for two decades – and we’re just getting started. We bridge the data-to-action gap and power agile procurement by combining AI with procurement expertise. 

Procurement organizations need an analytics partner they can trust. We’re large enough to deliver, small enough to care.

If you would like to learn more about Sievo you can request a   free 30-minute demonstration  with one of our product specialists

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Call for change

Following a period of growth generated through mergers and acquisitions, this leading global financial institution wanted to consolidate a fragmented procurement function.

A dynamic market environment that included increasing cost pressure and growing uncertainty, led the company to have a laser focus on improving its compliance. Regulatory changes meant that it needed to verify its procurement processes.

Additionally, an explosion in digital banking capabilities was creating new risks. The sophistication of financial crime and greater number of criminal activities afforded by digitalization, meant the institution needed to upgrade its anti-fraud protections. The financial institution needed to move away from manual processes to intelligent, digital procurement operations.

When tech meets human ingenuity

The company moved to a new digital procurement function by using SynOps to bring together data insights, digital technologies and human talent to deliver breakthrough value.

A blend of offshore, nearshore and onshore resources handle over 250,000 purchase orders and nearly 600,000 invoices every year, which streamlined processes from requisitions through to payments.

Customer Service Desk chatbot helps employees and suppliers to get answers faster to common queries, based on a deep analysis of the type and frequency of past agent interactions.

64% of invoice fields are captured with 98% accuracy by using optical character recognition to automatically process and validate invoices.

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Making the leap with generative AI in procurement

Coleads McKinsey projects at the intersection of procurement and digital and analytics, including generative AI

March 20, 2024 Many CPOs question the transformative impact that generative AI (gen AI) can deliver. The arguments range from overly niche functionality to concerns about the accuracy and security of using the large language models (LLMs) that underpin it. More often, though, we hear skepticism about the start-up cost and initial duplication of existing work. Sixty-six percent of CPOs surveyed in McKinsey’s CPO 100 survey in H2, 2023, believe gen AI is still years from generating substantive business results.

About QuantumBlack, AI by McKinsey

What we have observed, however, not only changed our minds but also those of some of the most skeptical procurement leaders. Gen AI has already started to drive measurable impact in four ways: 1) generating content, 2) enabling synthesis, 3) augmenting engagement, and 4) accelerating software programming.

Content generation

A key procurement use case is automating document creation to reduce manual work. Many CPOs believe that this type of content generation is not yet mature. “Gen AI is a great toy. It’s good to play with, but our day-to-day work remains unchanged,” a senior procurement executive of a Fortune 100 medtech company told us.

That daily work could be changed. LLMs can be trained on specialized data to generate highly tailored content. Some of the more common examples include custom-designed requests for proposals (RFPs) and multiparty contracts.

One McKinsey client team recently developed an RFP engine, leveraging sanitized templates and cost drivers from more than 10,000 RFPs and their responses. 1 The technology replicated complex “best of best” analyses in a fraction of the time. It also learned what drove winning bids and redesigned future RFPs for optimal bid structure and cost granularity. Finally, it predicted, and prevented, omissions and mistakes in the bids.

A second use case was applied to contractual terms and conditions, one of the most mature applications of gen AI. LLMs trained on a database of contracts jump-started the first draft and created custom clauses that reflected a specific supplier agreement. We have already seen multiple contract life cycle management solution providers in the market. They have cracked the code on practical, effective solutions and offer off-the-shelf tools that require little customization.

Information synthesis

The magic of gen AI lies in its ability to retrieve, summarize, and extract insights from multiple unstructured data sources simultaneously. It can solve unstructured, end-to-end problems better than any prior technology, but is often perceived as a next-generation search engine that requires a savvy user to pose the right questions. This perception underestimates the power of gen AI for procurement, as it can be quickly deployed in two very common activities: category strategy and supplier sourcing.

A good category strategy reflects insights and trends from the external market and internal priorities. It includes supplier performance attributes, demand specifications, and risk management. A multilayered gen AI tool can generate a robust end-to-end category strategy in far less time than was previously possible, coordinating input from many sources and contributors. Over the past year, we saw gen AI models formulate strong strategies in categories ranging from highly specialized precision-machined parts to more mundane temporary labor. The resulting strategies were impressive and delivered with accuracy, security, and fairness.

The traditional route to supplier identification—searching through industry publications and database queries—is long gone. Gen AI combines keyword and capability-based searches with highly specific prompts to deliver superior results. An LLM can ingest publicly available information and cross-reference it with seed companies (incumbent suppliers with known capabilities that serve as exemplars for the model). The model scans broadly for similar patterns and identifies clusters of potential suppliers for further evaluation.

For example, a prompt of “suppliers for high-pressure injection molding based in Southeast Asia that are ISO 9002 certified” yields three times the results of traditional search engines. This approach improves success by scouring substantially more territory, augmenting available data, and filtering the data through proven supplier scoring criteria.

Interactive engagement

Interactive engagement is another frontier for gen AI–enabled procurement. Chatbots commonly guide category managers and business partners through their journeys. “Great procurement is based on relationships—you cannot replace that with a chatbot,” more than one CPO has told us. In practice, gen AI enhances internal and external relationships by eliminating friction due to different time zones, busy schedules, and overwhelming data. Instead, it aids conversations with talking points that better reflect the counterparty’s priorities.

Examples include negotiator pilots that craft scripts based on multiple scenarios. Gen AI can play different roles in mock negotiations to pressure test a strategy by examining arguments and counterarguments. The latest models are experimenting with iterative outcome evaluation based on different supplier responses—much like chess. The output is a recommended negotiation approach—confrontational, collaborative, fact based, or leverage based—that is most likely to succeed.

Software programming acceleration

Lastly, we have seen applications started in the IT department flow over to procurement. Most modern sourcing data cubes are built from a myriad of sources, starting with the enterprise resource planning and financial systems. For companies that have grown through mergers or have discrete business units, these systems are often not synchronized and require substantial manual work-arounds. Today’s gen AI models can take script code from one system and bridge it into others, greatly accelerating digital sourcing transformations and tool adoption. For some CPOs, this has taken years off their technology road maps and shifted the ROI in favor of greater automation and analytic horsepower. It is a terrific illustration of gen AI and traditional AI working together to create leapfrog progression in procurement capabilities.

From skepticism to certainty

To a skeptical, untrained eye, gen AI applications in procurement may appear niche or gimmicky. In reality, LLMs are trained across multiple knowledge domains, which allows them to handle broad, layered questions and draw implications that lead to good conclusions. It is one of the key capabilities that procurement organizations need to evolve and strengthen, moving from a pure executing function to a strategic, business-leading function.

1 Based on comparison of supplier discovery for direct materials suppliers in a traditional method versus AI-driven scouting across sectors (industrials, consumer, and life sciences).

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Artificial intelligence in procurement: real-world case studies, introduction to ai in procurement.

Artificial Intelligence (AI) has revolutionized numerous industries, and procurement is no exception. With the ability to analyze vast amounts of data, identify patterns, and make data-driven decisions in real-time, AI is transforming the way organizations manage their procurement processes . From supplier management to spend analysis and inventory optimization, AI is streamlining operations, enhancing efficiency, and driving cost savings.

In this blog post, we will explore real-world case studies that highlight how companies have successfully implemented AI in procurement. We’ll delve into specific examples where AI has had a significant impact on supplier management , spend analysis, and inventory optimization. Furthermore, we’ll discuss the challenges and limitations of using AI in procurement and explore potential future possibilities for this rapidly evolving technology.

So grab your virtual shopping cart as we embark on an exciting journey through the world of artificial intelligence in procurement – where cutting-edge technology meets supply chain excellence!

Advantages of AI in Procurement

Artificial Intelligence (AI) has revolutionized various industries, and procurement is no exception. The integration of AI technology in procurement processes offers numerous advantages that can enhance efficiency, accuracy, and decision-making.

One of the primary benefits of AI in procurement is its ability to automate repetitive tasks. With machine learning algorithms, AI systems can analyze large volumes of data quickly and accurately. This saves valuable time for procurement professionals who can now focus on more strategic activities such as supplier relationship management or contract negotiation.

Furthermore, AI-powered analytics tools enable organizations to gain deep insights into their spend patterns. By analyzing historical data from multiple sources, including invoices and contracts , AI algorithms can identify cost-saving opportunities and potential risks. This helps companies make informed decisions when it comes to negotiating prices with suppliers or optimizing sourcing strategies.

Another advantage lies in predictive analytics capabilities offered by AI systems. These technologies use past performance data to forecast future demand trends accurately. By leveraging this information, organizations can optimize their inventory levels, reducing both excess stock costs and stockouts.

Additionally, the implementation of chatbots powered by natural language processing allows for streamlined communication between buyers and suppliers. Chatbots provide instant responses to inquiries about product availability or order status without requiring human intervention.

Moreover, incorporating AI into supplier management processes improves the evaluation process by providing a comprehensive assessment based on objective criteria rather than subjective judgment alone. This ensures fair treatment for all vendors while helping organizations select the most suitable partners based on predefined parameters such as quality standards or delivery timeframes.

In conclusion,

The advantages presented above are just a glimpse into how AI is transforming procurement practices across industries globally. From automating mundane tasks to offering advanced analytics capabilities for better decision-making; there’s no denying that the integration of artificial intelligence holds immense potential for improving operational efficiency and driving cost savings in procurement departments worldwide.

Real-World Case Studies

Now that we have explored the advantages of artificial intelligence (AI) in procurement, let’s take a closer look at some real-world case studies where companies have successfully implemented AI to streamline their procurement processes.

Company A, a global manufacturing firm, decided to harness the power of AI for supplier management. By utilizing advanced machine learning algorithms, they were able to analyze and evaluate potential suppliers based on various factors such as quality, cost, and delivery reliability. This not only saved them valuable time but also ensured better decision-making when it came to selecting reliable suppliers.

In another example, Company B used AI for spend analysis. With vast amounts of data flowing through their procurement systems daily, it was becoming increasingly challenging for them to identify savings opportunities. By implementing an AI-powered spend analysis tool, they were able to automatically categorize and analyze spending patterns across different categories. As a result, they could pinpoint areas where cost reduction strategies could be applied effectively.

Company C faced inventory management challenges due to unpredictable demand fluctuations. They turned to AI technology and implemented predictive analytics models that took into account historical sales data along with external factors such as weather conditions or holidays. This allowed them to optimize their inventory levels by accurately forecasting demand patterns and minimizing stockouts while avoiding excess inventory.

These real-world case studies demonstrate how AI can revolutionize traditional procurement practices by enhancing decision-making capabilities and improving overall efficiency. However, it is important to acknowledge that implementing AI in procurement comes with its own set of challenges and limitations which we will explore in the next section.

Stay tuned as we delve deeper into the potential roadblocks organizations may face when adopting AI solutions in procurement!

A. Company A: Implementation of AI for Supplier Management

Company A, a leading player in the procurement industry, has successfully implemented artificial intelligence (AI) for supplier management. By leveraging AI technology, they have revolutionized their procurement processes and achieved significant improvements.

One of the key advantages of using AI in supplier management is the ability to streamline and automate tasks that were previously time-consuming and manual. With AI-powered systems, Company A can now easily collect, analyze, and categorize large volumes of data from various sources. This enables them to make informed decisions based on real-time insights.

Moreover, AI algorithms help identify patterns and trends in supplier performance data. By analyzing historical data on factors such as delivery times, quality standards, and pricing accuracy, Company A can accurately predict potential risks or opportunities with suppliers. This allows them to proactively manage their relationships with suppliers and ensure optimal performance.

Additionally, by implementing AI for supplier management, Company A has greatly improved their efficiency in handling negotiations and contracts. The system’s natural language processing capabilities enable faster contract review by extracting relevant information from documents automatically. This saves valuable time for both Company A’s procurement team as well as their suppliers.

Furthermore, AI helps enhance transparency throughout the supply chain by monitoring compliance issues closely. Real-time alerts are generated when deviations occur from predefined parameters or regulations set by both parties involved – allowing timely corrective actions to be taken.

In conclusion (as per instruction), through the implementation of AI for supplier management purposes at Company A we see clear benefits arising across multiple aspects including streamlining tasks via automation; making informed decisions utilizing accurate predictions; improving efficiency during negotiations & contract reviews; enhancing supply chain transparency via effective monitoring while ensuring compliance adherence throughout

B. Company B: Utilizing AI for Spend Analysis

Company B, a leading player in the procurement industry, has successfully harnessed the power of Artificial Intelligence (AI) for spend analysis. By leveraging AI technologies, they have revolutionized their approach to understanding and managing their spending patterns.

Traditionally, conducting a thorough spend analysis was a time-consuming and manual process that required combing through vast amounts of data. However, with the implementation of AI algorithms and machine learning models, Company B has been able to streamline this task significantly.

The use of AI in spend analysis allows Company B to identify trends and patterns in their spending behavior quickly. These insights help them make more informed decisions about supplier selection, contract negotiation, and cost optimization strategies. With AI’s ability to process large volumes of data at lightning speed, the accuracy and efficiency of these analyses have greatly improved.

Furthermore, AI-powered tools enable real-time monitoring of spending activities across different departments or business units within Company B. This level of visibility provides valuable information for identifying potential areas for cost savings or opportunities for consolidating suppliers.

In addition to improving efficiency and decision-making processes related to spend management, AI also helps Company B detect anomalies or irregularities in their financial transactions. By automatically flagging any suspicious patterns or discrepancies in spending behavior, they can proactively address issues such as fraud or non-compliance before they escalate.

By utilizing AI for spend analysis purposes, Company B has gained a competitive edge in the procurement landscape. The ability to analyze massive amounts of data quickly and accurately empowers them to optimize costs effectively while ensuring compliance with regulatory standards.

Stay tuned as we explore more real-world case studies on how companies are integrating Artificial Intelligence into various aspects of procurement!

C. Company C: Using AI to Optimize Inventory Management

Company C is a perfect example of how artificial intelligence can revolutionize inventory management. By harnessing the power of AI, they were able to optimize their inventory levels and streamline their operations.

With the help of AI algorithms, Company C was able to accurately forecast demand patterns and identify potential supply chain disruptions. This allowed them to make data-driven decisions and ensure that they always had the right amount of inventory on hand.

Additionally, AI provided real-time insights into customer preferences and market trends. By analyzing vast amounts of data from various sources, Company C could anticipate shifts in consumer behavior and adjust their inventory accordingly. This not only prevented overstocking or understocking but also helped them stay ahead in a competitive market.

Furthermore, AI-enabled predictive analytics helped Company C identify potential risks in their supply chain. By continuously monitoring factors such as supplier performance, lead times, and transportation delays, they were able to proactively address any issues before they escalated into major problems.

By leveraging AI for inventory management, Company C achieved increased efficiency and cost savings while ensuring high customer satisfaction due to timely deliveries. It’s clear that AI has immense potential in optimizing inventory management processes across industries. As technology continues to advance, we can expect even more significant advancements in this field!

Challenges and Limitations of AI in Procurement

Implementing artificial intelligence (AI) in procurement processes has undoubtedly brought numerous benefits to companies. However, it is important to acknowledge that there are still some challenges and limitations associated with this technology.

One significant challenge is the quality of data input. AI relies heavily on accurate and relevant data to generate meaningful insights. If the data fed into the system is incomplete or inaccurate, it can lead to flawed analysis and decision-making.

Another challenge lies in integrating AI systems with existing procurement infrastructure. Many organizations already have established software platforms for managing their procurement activities. It can be complex and time-consuming to integrate AI technologies seamlessly into these existing systems without disrupting ongoing operations.

Furthermore, there may be concerns about the ethical implications of using AI in procurement. For instance, biases embedded within algorithms could potentially lead to unfair supplier selection or pricing decisions.

Additionally, a limitation of AI technologies is their inability to fully replace human judgment and intuition. While they excel at processing vast amounts of data quickly, they may struggle when faced with complex negotiations or strategic decision-making that requires a deep understanding of business contexts.

Cost can also be a limitation for some organizations looking to adopt AI solutions for procurement. Implementing advanced AI technologies often requires substantial investment in training employees, acquiring new hardware/software systems, and maintaining them over time.

These challenges and limitations should not discourage organizations from leveraging the power of AI in their procurement processes but rather serve as points for consideration when implementing such technology successfully.

Future Possibilities and Potential Impact on the Industry

The advancements in artificial intelligence (AI) have already shown great promise in transforming procurement processes. However, the potential of AI in procurement is far from being fully realized. As technology continues to evolve at a rapid pace, there are several exciting possibilities for the future of AI in this industry.

One area where AI can make a significant impact is predictive analytics. With access to vast amounts of data, AI algorithms can analyze historical purchasing patterns and market trends to forecast future demand accurately. This capability can help organizations optimize their inventory levels, reduce costs , and improve overall supply chain efficiency.

Another exciting possibility is the integration of natural language processing (NLP) into procurement systems. NLP enables machines to understand and interpret human language, allowing buyers to interact with systems using conversational interfaces or voice commands. This advancement could streamline procurement workflows by eliminating manual data entry tasks and enhancing user experience.

Furthermore, machine learning algorithms can continuously learn from past experiences and adapt their decision-making processes accordingly. In procurement, this means that AI-powered systems can become increasingly efficient over time as they gather more data about supplier performance, market conditions, pricing trends, etc.

In addition to these advancements within individual organizations’ operations, there is also potential for collaborative platforms powered by AI that connect multiple buyers and suppliers across industries. These platforms could facilitate better communication among stakeholders while enabling real-time price monitoring and negotiation support.

While the possibilities are certainly intriguing, it’s important to acknowledge that integrating AI into procurement processes comes with challenges as well. Data quality issues must be addressed so that accurate insights can be generated from large datasets. Furthermore, organizational resistance or lack of understanding may hinder successful implementation efforts.

In conclusion,…

(Word count: 297 words)

Conclusion Artificial Intelligence has revolutionized the field of procurement, offering significant advantages and real-world benefits for businesses. Through the case studies mentioned above, we have witnessed how AI can enhance supplier management, optimize spend analysis, and streamline inventory management.

Companies like Company A have successfully implemented AI to automate supplier onboarding processes and gain better visibility into their supply chain. This has resulted in improved efficiency, reduced costs, and enhanced collaboration with suppliers.

Similarly, Company B leveraged AI to analyze vast amounts of spending data quickly and accurately. By doing so, they were able to identify cost-saving opportunities, negotiate better contracts with vendors, and make more informed purchasing decisions.

Furthermore, Company C utilized AI algorithms to optimize their inventory management system. As a result of predictive analytics capabilities provided by AI technologies, they could forecast demand accurately, avoid stockouts or excess inventory situations while maximizing profitability.

However beneficial it may be; implementing AI in procurement does come with its challenges. Obtaining high-quality data sets for training the algorithms is crucial but can often be time-consuming and complex. Additionally adjusting existing systems and processes to incorporate new technologies requires careful planning and change management strategies.

Looking towards the future brings endless possibilities for AI in procurement. Advancements such as natural language processing (NLP) will enable more sophisticated communication between humans and machines in procurement tasks like contract review or negotiation process . Machine learning models might become even more accurate at predicting market trends based on historical data analysis resulting in smarter decision-making processes within organizations.

AI’s integration into procurement operations offers immense potential for businesses across various industries to transform their sourcing practices fundamentally. By leveraging advanced technologies like machine learning algorithms or natural language processing, organizations can achieve greater efficiency, cost savings, and strategic insights from their procurement functions . While there are challenges in terms of implementation, the benefits far outweigh them when considering long-term gains. It is clear that artificial intelligence is here to stay and will continue to shape the future of procurement , enhancing effectiveness and driving innovation in

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The Impact of Direct Procurement Metrics on Business Performance

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Winners are not designed by chance but by the choices they make. Successful professionals are the ones who have faced litmus tests and have never been found wanting. They are the dreamers, the rebels, the ones who challenge the status quo and create success stories.

We at Zycus, salute the Winners from Procurement and have documented their triumph in 6 unique case studies encompassing the areas of Spend Analysis, eSourcing, Contract Management, Supplier Management, Savings Management, and Procure-to-Pay Management.

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Artificial Intelligence in Procurement: Case Studies from GEP

• AI-powered solutions can help businesses to automate tasks, improve efficiency, and gain new insights into their procurement strategies.
• AI is well positioned to help businesses to catch the pulse of their customers, understand their needs, resulting in better customer experience.
• With incremental leaps in technology, AI will continue to deepen its impact on procurement software solutions.

October 16, 2023 | Procurement Software

Artificial intelligence (AI) is rapidly transforming the procurement landscape. AI-powered procurement solutions can help businesses to improve their efficiency by automating tasks as well as help them gain deep insights into their operations.

As a leading provider of AI-powered procurement solutions, GEP's solutions are used by businesses of all sizes to improve their procurement performance. Here are a few artificial intelligence procurement case studies that discuss how AI-powered procurement solutions have helped businesses to achieve success.

Artificial Intelligence in Procurement Case Study #1

A global oil and gas company wanted to streamline, unify, and automate its procurement operations. Its existing system was fragmented, with a limited set of automation capabilities and multiple sources of data across systems and business units. Although the client had more than 20,000 B2B customers and its annual revenue was more than $14 billion, it had limited supplier interaction through systems and high sourcing cycle time. As a result, the client wanted to make the procurement system more consistent, efficient and automated.

GEP SMART™, the AI-driven procurement platform, made the client’s procurement a seamless, integrated function for the client, enabling a high level of automation. GEP’s solution also strengthened the client’s entire source-to-contract and procure-to-pay process, encouraged catalog-based buying, and eased the supplier onboarding process.

This case study is a must-read for procurement professionals looking to rid their operation of silos and transform it into a united, efficient function that drives value.

Read the case study here: Global Oil & Gas Company Transforms Procurement Operations With GEP SMART™

Artificial Intelligence in Procurement Case Study #2

A Global 500 heavy equipment manufacturer with more than 400 sites and multiple subsidiaries wanted to transform its entire sourcing processes. The client’s transformation objectives included streamlining procurement operations, improving spend visibility and forecast of material costs. The chose GEP as a partner to deploy the best-in-class source-to-pay (S2P) software in order to provide a boost to its spend, sourcing and category management functions. With the help of AI-powered GEP SOFTWARE™, the manufacturer was able to unify and replace its disparate legacy systems that were slowing down its global operations. GEP was able to streamline the workflow and capture all direct material sourcing process data in one unified system, making all demand visible in one place for the first time.

The software functions implemented by GEP included sourcing, spend, analytics and category strategy. The procurement software solution’s intuitive interface helped the client drive user adoption of sourcing/RFX and CLM tools — from under 20% to more than 80%. This helped the client gain much-needed visibility into spend, as well as real-time insights into suppliers, cost breakdowns and risk, enabling it to forecast material needs more accurately and improve sourcing efficiency, saving millions of dollars in costs.

Read the case study here: Global Heavy Equipment Manufacturer Saves $45M in Direct Material Sourcing With GEP SOFTWARE

Artificial Intelligence in Procurement Case Study #3

A leading global pharmaceutical company wanted to transform its research and early development (R&ED) infrastructure with a bespoke, data-driven and AI-enabled platform that would facilitate modern clinical trials.

The pharma giant needed new-age infrastructure that would enable it to keep up with rapidly changing requirements in clinical trials. The company partnered with GEP to achieve this goal. GEP adopted a multi-pronged approach to help the firm identify its needs and select a suitable cutting-edge platform that transformed the R&ED infrastructure.

This case study demonstrates how the strategic partnership enabled the company to speed up drug development, improve patient experience and enhance the operational efficiency of its clinical trials.

Read the case study here: How GEP Helped A Pharma Giant Transform R&ED Procurement Infrastructure and Reduce Drug Development Time

Advantages of Integrating Artificial Intelligence in Procurement

As AI continues to make incremental leaps, the impact on procurement will continue to deepen. Therefore, businesses that embrace AI will be well-positioned to succeed in the future. Some key benefits include:

Increased Competitiveness

By automating tasks, improving efficiency, and reducing costs, AI can help businesses to become more competitive in their markets.

Improved Customer Experience

Artificial intelligence with all its technological advancements is well positioned to help businesses to catch the pulse of their customers, understand their needs, resulting in better customer experience. From personalizing product recommendations to providing instant customer support to providing real-time resolutions, AI can provide quick and efficient support.

More Innovation

AI can help businesses to develop new products and services more quickly and efficiently. For example, enterprises can use AI to quickly analyze customer data and identify new product opportunities, and accordingly devise strategies and production methods.

AI is rapidly transforming the procurement landscape. AI-powered solutions can help businesses to automate tasks, improve efficiency, and gain new insights into their procurement strategies. Be it heavy engineering, oil and gas or the life sciences industry, artificial intelligence in procurement will have a deeper impact on sustainability practices of businesses – including reducing waste, improving energy efficiency, and identifying sustainable suppliers.

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Hacking the Case Interview

Have an upcoming supply chain case interview and don’t know how to prepare? We have you covered!

In this article, we’ll cover what a supply chain case interview is, a step-by-step guide to solve any supply chain case, and a comprehensive review of the basics of supply chains.

If you’re looking for a step-by-step shortcut to learn case interviews quickly, enroll in our case interview course . These insider strategies from a former Bain interviewer helped 30,000+ land consulting offers while saving hundreds of hours of prep time.

What is a Supply Chain Case Interview?

A supply chain case interview is a type of consulting case interview that focuses on evaluating a candidate's ability to analyze and solve complex supply chain-related problems.

In this type of interview, candidates are presented with a hypothetical business scenario or real-world supply chain challenge and are expected to provide structured and logical solutions.

Supply chain cases typically involve various aspects of the supply chain process, such as sourcing, procurement, production, distribution, inventory management, and logistics.

Candidates are often required to assess the efficiency, cost-effectiveness, and overall optimization of the supply chain operations.

To excel in a supply chain case interview, candidates need to demonstrate strong analytical skills, problem-solving abilities, attention to detail, and an understanding of supply chain concepts and principles.

They must also showcase their capability to develop actionable recommendations that address the challenges presented in the case.

Candidates should expect to use quantitative analysis, data interpretation, and logical reasoning to formulate their solutions.

Additionally, effective communication skills are crucial to explain their thought process, assumptions, and recommendations clearly to the interviewers.

How to Solve a Supply Chain Case Interview

There are eight steps to solve a supply chain case interview.

Be aware that your supply chain case interview may cover all of these steps, or it may skip some of these steps, depending on what the interviewer wants to focus their time on.

1. Understand the case

At the outset of a supply chain case interview, your priority is to thoroughly understand the context and the challenges presented by the case.

Pay close attention to any clues provided about the company's operations, suppliers, customers, distribution methods, and potential pain points in its supply chain.

Clarify any uncertainties by asking insightful questions that can help you gather relevant information.

By gaining a clear understanding of the case context and objectives, you'll be better equipped to define the problem, formulate a structured approach, and ultimately arrive at effective solutions to address the supply chain challenges presented in the case.

2. Define the problem

Once you have a solid grasp of the case details, move on to defining the core problem or objective that needs to be addressed in the supply chain case interview.

This step involves breaking down the broader supply chain challenges into specific, actionable issues that you can analyze and provide solutions for.

Look for key pain points or bottlenecks in the supply chain process that may be impacting the company's operations, costs, efficiency, or customer satisfaction.

Articulate the problem succinctly and clearly, ensuring that your definition captures the essence of the supply chain issues at hand.

A well-defined problem will serve as the foundation for the remainder of your analysis, guiding your approach and helping you structure your recommendations effectively.

3. Gather information

In the supply chain case interview, the next critical step is to gather relevant information and data that will enable you to analyze the problem thoroughly. This involves seeking clarification from the interviewer about any aspects of the case that are not fully clear and requesting essential data points that are required for your analysis.

Additionally, you may be provided with data, charts, or graphs that simulate the company's supply chain operations.

Your ability to ask insightful questions and extract pertinent information from the available data is crucial at this stage.

As you gather information, focus on understanding the different stages of the supply chain, the key players involved, the flow of materials and products, inventory management practices, distribution channels, and any existing challenges.

Your proficiency in identifying relevant data and using it to build a comprehensive understanding of the situation will set the stage for the subsequent analysis and recommendations you'll provide in the case interview.

4. Analyze the data

With a solid grasp of the information collected, the next step in a supply chain case interview is to analyze the current supply chain operations.

This involves identifying strengths, weaknesses, bottlenecks, inefficiencies, and potential areas for improvement within the supply chain.

Utilize your problem-solving skills to break down the complex supply chain into its various components and assess how each component impacts the overall process. Consider factors such as lead times, transportation costs, inventory levels, demand forecasting accuracy, and supplier relationships.

Identify any patterns or trends in the data that may indicate areas of concern or opportunities for optimization.

This analytical phase requires a structured approach and the ability to connect the dots between different aspects of the supply chain.

Your goal is to uncover insights that will inform your recommendations for enhancing the supply chain's effectiveness, efficiency, and overall performance.

5. Identify solutions

After analyzing the supply chain, the next crucial step is to develop practical solutions and recommendations for improving its efficiency and effectiveness. This is where your creativity and problem-solving skills come into play.

Based on the insights gained from the analysis, brainstorm potential solutions to address the identified challenges or bottlenecks. Consider various strategies, such as:

• Optimizing inventory management
• Improving demand forecasting accuracy
• Streamlining transportation and logistics
• Enhancing supplier collaboration
• Implementing technology solutions like supply chain software

Your recommendations should be tailored to the specific issues you've identified and should align with the company's overall goals and objectives.

It's important to think critically about the feasibility of each solution and its potential impact on the supply chain's performance. You may need to prioritize solutions based on their potential benefits and implementation complexity.

Ultimately, your goal is to provide actionable recommendations that can lead to tangible improvements in the supply chain's efficiency, cost-effectiveness, and overall value to the organization.

6. Evaluate trade-offs

In a supply chain case interview, the ability to assess trade-offs is a vital skill. After analyzing different options and proposing potential solutions, you need to critically evaluate the trade-offs associated with each choice.

Trade-offs often involve considerations such as cost, time, risk, and impact on various stakeholders. Determine which solution offers the best balance between different factors, taking into account both short-term benefits and long-term implications.

For example, a solution that reduces costs might lead to longer lead times or increased supply chain complexity.

Effective trade-off evaluation showcases your analytical thinking, strategic acumen, and the capacity to make informed decisions that align with the broader business objectives.

Your ability to weigh pros and cons demonstrates your capacity to handle the complexities of real-world supply chain challenges.

7. Develop recommendations

In the context of a supply chain case interview, developing recommendations is a crucial step that demonstrates your problem-solving abilities.

After thoroughly analyzing the situation, identifying potential solutions, and evaluating trade-offs, you need to formulate actionable recommendations.

Your recommendations should be aligned with the goals and objectives of the company, addressing the key issues identified earlier.

These recommendations should be specific, measurable, achievable, relevant, and time-bound (SMART), allowing the company to implement them effectively. Consider the potential risks and challenges associated with each recommendation and propose strategies to mitigate them.

Your ability to provide clear and concise recommendations showcases your strategic thinking, practicality, and capacity to drive positive change within the supply chain.

Additionally, crafting recommendations that consider both short-term gains and long-term sustainability demonstrates your understanding of the broader business implications.

8. Quantify the impact

Quantifying the impact is a critical aspect of solving a supply chain case interview.

After proposing recommendations, you need to assess the potential outcomes of implementing these changes.

This involves using relevant metrics and key performance indicators (KPIs) to quantify the expected improvements in the supply chain's efficiency, cost savings, customer satisfaction, and overall business performance.

Utilize data and information provided in the case to estimate the potential financial and operational benefits of your recommendations.

By attaching specific numbers to your recommendations, you demonstrate your ability to translate strategic solutions into tangible results. Employ quantitative analysis to showcase the value your proposed changes would bring to the company's bottom line.

This step highlights your analytical skills, business acumen, and capacity to drive measurable improvements within the supply chain operations.

In addition to supply chain case interviews, we also have additional step-by-step guides to: market entry case interviews , growth strategy case interviews , M&A case interviews , pricing case interviews , operations case interviews , and marketing case interviews .

Essential Supply Chain Knowledge You Need to Know

Below are five different topics in supply chain that you should be familiar with for your supply chain case interviews.

Remember, you don’t need to be an expert or get very technical with any of these, but it will be helpful to understand what each topic is so that you have an understanding and intuition for solving supply chain problems.

1. Supply chain components

The supply chain is a complex network of interconnected activities, processes, and entities that collaborate to ensure the seamless flow of products and services from raw material suppliers to end customers.

Understanding the key components of a supply chain is essential for anyone looking to grasp the fundamentals of supply chain.

Suppliers : Suppliers provide the raw materials, components, and resources necessary for production. Selecting reliable and quality-focused suppliers is crucial to maintaining the integrity of the supply chain.

Manufacturers : Manufacturers transform raw materials into finished products through various production processes. They play a pivotal role in optimizing production efficiency and ensuring product quality.

Distributors : Distributors are responsible for storing and delivering products to various points in the supply chain. They manage inventory, transportation, and often serve as intermediaries between manufacturers and retailers.

Retailers : Retailers interact directly with end customers, selling products through various channels such as brick-and-mortar stores or online platforms. They monitor consumer demand and provide feedback to other supply chain entities.

Customers : Customers are the ultimate recipients of products or services. Their demand influences the entire supply chain, driving production, distribution, and inventory decisions.

2. Supply chain activities

Supply chain activities encompass a range of interconnected processes that collaborate to ensure the efficient movement of goods, information, and resources from the initial stages of production to the end consumer.

These activities play a pivotal role in optimizing operations, reducing costs, and meeting customer demands. Let's delve into the key components of supply chain activities:

Planning and Forecasting : Effective supply chain planning involves predicting customer demand, aligning production capacities, and managing inventory levels. Accurate demand forecasting helps prevent stockouts or excess inventory, ensuring optimal resource allocation.

Sourcing and Procurement : This activity involves selecting suppliers, negotiating contracts, and acquiring raw materials or components. Sourcing decisions impact cost, quality, and lead times, influencing overall supply chain efficiency.

Production : Manufacturing is where raw materials are transformed into finished goods. Efficient production processes, quality control, and lean manufacturing techniques are crucial to meet demand while minimizing waste.

Inventory Management : Proper management of inventory levels is essential to prevent shortages and overstocks. Inventory optimization tools help strike the right balance between carrying costs and meeting customer demand.

Warehousing and Distribution : Warehouses serve as hubs for storing and distributing products. Efficient warehousing operations ensure timely delivery and minimize transportation costs by consolidating shipments.

Transportation : Moving products from one point to another is a critical aspect of supply chain activities. Selecting appropriate transportation modes, optimizing routes, and tracking shipments enhance efficiency.

Demand Fulfillment : Ensuring timely order fulfillment involves coordinating production, inventory levels, and distribution. Meeting customer orders promptly enhances customer satisfaction.

Information Flow : Information is the backbone of supply chain activities. Real-time data sharing across supply chain entities enables informed decision-making, enhances coordination, and minimizes delays.

Demand Management : Managing customer demand involves understanding market trends, analyzing consumer behavior, and aligning production to meet varying demand levels.

Supplier Relationship Management : Nurturing positive relationships with suppliers fosters collaboration and enables agile responses to changing market conditions.

Quality Control : Maintaining product quality is crucial to avoid recalls and returns. Rigorous quality control processes ensure products meet customer expectations.

Reverse Logistics : Managing the flow of goods in reverse, such as returns and recycling, is an emerging aspect of supply chain activities. Efficient reverse logistics processes reduce waste and environmental impact.

Technology Integration : Modern supply chains leverage technology such as IoT devices, RFID tags, and data analytics to monitor operations, track shipments, and optimize processes.

3. Metrics and KPIs

Metrics and Key Performance Indicators (KPIs) are essential tools that provide quantifiable insights into the performance of supply chain activities. They enable organizations to assess efficiency, identify areas for improvement, and make data-driven decisions. Let's explore the significance of metrics and KPIs in the supply chain context:

Operational Efficiency : Metrics such as Order Fill Rate, On-Time Delivery, and Cycle Time measure the speed and accuracy of order fulfillment. A high order fill rate indicates efficient inventory management and timely deliveries, enhancing customer satisfaction.

Inventory Management : Inventory Turnover Ratio, Days Sales of Inventory, and Holding Cost per Unit measure how effectively organizations manage their inventory. Optimizing these metrics reduces carrying costs while ensuring product availability.

Supplier Performance : Metrics like Supplier Lead Time, Supplier On-Time Delivery, and Supplier Defect Rate assess the reliability and effectiveness of suppliers. Strong supplier performance enhances production consistency and reduces supply chain disruptions.

Logistics Efficiency : Transportation Cost per Unit, Freight Cost Ratio, and Inbound Freight Cost measure transportation efficiency and cost-effectiveness. Optimizing these metrics minimizes transportation expenses while maintaining service levels.

Demand Forecast Accuracy : Forecast Accuracy, Mean Absolute Percentage Error (MAPE), and Bias measure the accuracy of demand forecasts. Accurate forecasts enable organizations to align production and inventory with actual demand.

Quality Control : Metrics such as Defect Rate, Return Rate, and Customer Complaint Rate assess product quality. Lower defect rates and return rates signify effective quality control processes.

Cash-to-Cash Cycle Time : This metric measures the time it takes for investments to turn into cash flows. A shorter cycle time indicates efficient cash flow management.

Working Capital Ratio : This ratio compares current assets to current liabilities, indicating the organization's liquidity and ability to meet short-term obligations.

Total Cost of Ownership : This metric considers all costs associated with a product's lifecycle, including acquisition, operation, maintenance, and disposal. It helps make informed procurement decisions.

Supply Chain Flexibility : Metrics like Lead Time Variability and Response Time measure the ability to adapt to changing market conditions and customer demands.

Sustainability Metrics : Environmental impact metrics, such as Carbon Footprint, Water Usage, and Energy Consumption, assess the sustainability of supply chain operations.

Customer Satisfaction Metrics : Customer Satisfaction Score (CSAT), Net Promoter Score (NPS), and Customer Complaint Resolution Time gauge customer satisfaction and loyalty.

4. Lean and six sigma

Lean and Six Sigma are two methodologies that play a crucial role in optimizing supply chain operations, eliminating waste, and enhancing overall efficiency.

Lean Methodology : Lean principles focus on identifying and eliminating non-value-added activities, known as waste, from the supply chain.

Waste can take various forms, including overproduction, excess inventory, defects, waiting time, unnecessary transportation, and underutilized talent.

By streamlining processes and reducing waste, organizations can improve lead times, reduce costs, and enhance customer satisfaction.

Six Sigma Methodology : Six Sigma aims to minimize process variations and defects by using data-driven methodologies to achieve consistent and predictable outcomes.

The methodology follows the DMAIC (Define, Measure, Analyze, Improve, Control) framework to identify root causes of inefficiencies, optimize processes, and ensure sustained improvements.

By reducing process variations, organizations can achieve higher levels of quality and reliability.

Six Sigma projects often result in significant cost savings, improved cycle times, and enhanced customer satisfaction.

The use of statistical tools and methodologies empowers supply chain professionals to make informed decisions, drive continuous improvement, and enhance the overall effectiveness of their operations.

5. Continuous improvement

Continuous improvement is a fundamental concept in supply chain management that revolves around the idea of consistently enhancing processes, practices, and outcomes to achieve higher levels of efficiency, effectiveness, and customer satisfaction.

This philosophy emphasizes that there's always room for improvement, no matter how well a supply chain is performing.

Continuous improvement involves identifying areas for enhancement, implementing changes, monitoring the results, and making further adjustments based on feedback and data.

Supply Chain Case Interview Examples

Supply chain case interview scenario #1.

You are consulting for a retail company that operates multiple stores nationwide. The company is facing challenges with managing its inventory levels.

On one hand, excess inventory ties up capital and incurs storage costs, while on the other hand, inadequate inventory leads to stockouts and missed sales opportunities.

Your task is to help the company optimize its inventory levels to achieve a balance between meeting customer demand and minimizing costs.

How to Solve

Begin by clarifying the scope of the problem. Ask questions about the company's current inventory management practices, its supply chain network, and its primary challenges related to inventory levels.

Request historical sales data for the past year, including SKU-level information, lead times, reorder points, safety stock levels, and any available information on demand variability.

Examine the historical sales data to identify demand patterns, seasonality, and trends. Calculate key metrics like average demand and standard deviation of demand.

Determine the safety stock required to prevent stockouts during peak demand periods. Consider factors like lead time variability, desired service level, and demand variability.

Evaluate the company's current reorder points for each SKU. Assess whether they are aligned with demand variability, lead times, and safety stock requirements.

Analyze inventory turnover ratios for different SKUs. Identify products with consistently low turnover rates, as they may indicate excess inventory that ties up capital.

Based on your analysis, propose strategies to optimize inventory levels. This may involve adjusting reorder points, safety stock levels, and batch sizes.

Examine opportunities to reduce lead times in the supply chain. Faster replenishment can reduce the need for high safety stock levels.

Segment SKUs based on demand patterns, product characteristics, and other relevant factors. Tailor inventory management strategies to each segment.

Present your findings and recommendations to the client. Highlight potential cost savings, improved customer service levels, and enhanced supply chain efficiency through optimized inventory management.

Engage in a discussion with the interviewer, addressing any questions or concerns they may have about your analysis and recommendations.

Supply Chain Case Interview Scenario #2

You are consulting for a global consumer goods company that manufactures and distributes a wide range of products. The company is looking to optimize its distribution network to reduce costs and improve service levels.

Currently, the company operates multiple distribution centers (DCs) and warehouses around the world. Your task is to propose an optimal distribution network strategy.

Begin by gathering information about the company's current distribution network. Obtain data on the number and locations of DCs, transportation costs, inventory holding costs, lead times, and customer locations.

Analyze historical demand patterns across different regions and customer segments. Consider factors like seasonality, market growth, and demand variability.

Evaluate the transportation costs associated with shipping products from each DC to customer locations. Consider modes of transportation, distance, freight rates, and delivery times.

Calculate the total cost of the current distribution network, including transportation costs, inventory holding costs, warehousing costs, and any other relevant expenses.

Understand the company's desired service levels for different customer segments. This could involve factors like delivery times, order fill rates, and on-time delivery performance.

Propose alternative distribution network configurations, such as consolidating DCs, opening new DCs in strategic locations, or outsourcing distribution to third-party providers.

Quantify the trade-offs between cost reduction and service level improvement for each distribution network alternative.

Evaluate the benefits of centralizing inventory in a single location versus distributing inventory across multiple DCs. Consider factors like lead times, demand variability, and safety stock requirements.

Based on your analysis, recommend the optimal distribution network strategy that minimizes costs while meeting or exceeding service level requirements.

Discuss potential challenges and risks associated with implementing the recommended network strategy. Consider factors like operational disruptions, IT system changes, and supplier relationships.

Present your findings and recommendations to the client, highlighting the projected cost savings, improved service levels, and overall benefits of the optimized distribution network.

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Vehicle Operator Recruitment, Retention, and Performance in ADA Complementary Paratransit Operations (2010)

Chapter: chapter 10 - case studies of procurement and contracting best practices.

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

108 It has been estimated that between 70% and 90% of ADA paratransit programs use one or more contracted operators. Some systems also use contractors to perform reservations and scheduling and sometimes the dispatch function as well; depending on the contractual arrangements and relation- ships, these can be part of a turn-key operation contract or could be a contract for call center management or brokerage management services, with separate contracts for operations. Because the use of contractors for ADA paratransit is so pre- dominant, the ways in which contractors are procured bears examination relative to their impact on the recruitment and retention of operators. Some transit agencies include in their procurement docu- ments (RFP, sample contract) terms and/or requirements that result in effective operator recruitment and a low turnover rate. For example, some transit agencies have developed procure- ment documents that specify a minimum vehicle operator wage rate or “livable wage rate” or even a “competitive wage rate.” Moreover, some transit agencies have asked in their RFP for proposers to provide detailed information about wage rates and the fringe benefits that are available to operators. These agencies have discovered that it is not sufficient to question whether or not a proposer offers health care coverage to its employees, which only tells half the story; a follow-up and more illuminating question asks for the percentage of health care premiums that the employee must contribute. For exam- ple, if the percentage contribution is unrealistically high for an employee, health insurance effectively becomes unattainable. Other transit agencies in their procurement documents have emphasized the importance of operator recruitment and the retention of a stable work force in a more circuitous manner by (1) including evaluation criteria and/or bonuses paid to the contractor for achieving a certain level of operator retention and/or (2) requiring or providing bonuses for 100% pull-out coverage. By including such terms, these transit agencies are working to discourage the submission of proposals that include low operator wages, which are too often a casualty of the compet- itive bidding process. The goal is to generate competitive cost proposals that also accurately reflect competitive vehicle oper- ator wage rates and fringe benefits and result in a more stable vehicle operator workforce. The objective of this portion of the research was to collect best practice examples of procurement documents that directly or indirectly resulted in a fair vehicle operator compensation pack- age and to determine how positively those strategies effected operator recruitment and retention. Approach and Methodology The first step in the research was to identify transit systems who indicated in the national survey that they crafted their pro- curement documents to contain one or more of the following provisions: • Statements that a stable, experienced operator workforce was expected, along with evaluation criteria that put more weight on proposals that include effective vehicle operator recruitment and retention efforts or which otherwise evi- dence how this is to be achieved. • Requirements to provide detailed information about spe- cific operator recruitment and retention activities and the associated level of effort and cost specific to each effort. • Requirements for a minimum operator wage rate or “living wage” or favorable or competitive operator wages rates, along with additional requirements to provide details of the operator wage rates, including training wage rates, starting wage rates, and maximum wage rates per vehicle type if appropriate for each year of the contract. • Requirements to provide detailed cost information or assumptions about the levels of fringe benefits provided and the required employee percentage of contributions for health care insurance for each category of employee (single, married, family, etc.). C H A P T E R 1 0 Case Studies of Procurement and Contracting Best Practices

• Requirements to provide total and average operator wages and fringe, and the assumptions upon which that total cost is based, e.g., number of full-time and part-time operators, average shift lengths, total service hours by operator type and how that was calculated, and total operator pay hours by operator type and how that was calculated. • Requirements to achieve certain standards for operator retainage (or turnover) and/or to maintain a sufficient oper- ator work force or surrogate measure, such as achieving a certain standard for pull-out coverage; as part of this requirement, the specification of bonus payments for achiev- ing these standards or penalties for not achieving these standards. Among the respondents to the national survey, 26 public transit/paratransit agencies indicated that they included such language in their RFPs and contracts, and 14 of these 26 agen- cies indicated that they had had moderate or good success as a result. These 14 systems and the success indicated are shown in Table 10-1. The following summarizes those results: • Eleven agencies reported moderate or good success with conveying that a stable and experienced work force was expected. Of these, ten stated that this was mentioned in the RFP, and seven stated that they included this as an eval- uation criterion in rating the proposals. • Seven agencies indicated moderate or good success with the inclusion of a living or minimum wage standard. • Nine agencies indicated moderate or good success with incentives and penalties related to maintaining an adequate workforce and/or covering runs. Follow-up contact was made with these 14 agencies to obtain more detailed information. Follow-up contact focused on the following: • Determining whether any measurable improvements to service could be traced to the procurement/contractual provisions; • Obtaining procurement/contract documents to get the exact language used (or point systems used in the case of evaluation criteria); and • Discussing their perspectives and experiences with these strategies. An attempt was made to also interview one contractor from each system to get a contractor perspective on the pro- curement process or contract provisions. Thirteen of the 14 agencies responded, and detailed infor- mation was gathered from 12 of these systems. The research team was able to obtain a contractor perspective for 11 of the 12 systems contacted. Information from 11 of the systems contacted is included in the mini case studies below. Lessons Learned The data obtained in this study provided a strong and com- pelling case for the positive effect that certain ADA paratransit contractor procurement and contract provisions have on oper- ator recruitment and retention of the paratransit contractors. The following are lessons learned: • Transit agencies that included clear expectations of a stable, experienced operator workforce in their RFPs often did report lower rates of operator turnover. The language in the RFPs did appear to encourage potential bidders to improve compensation and focus more on efforts to maintain a sta- ble operator workforce. In most cases, performance penal- ties did not have to be imposed because compliance with goals and contract provisions was achieved. • Operator compensation stands out as the key determining factor of operator recruitment and retention. Even in areas without a municipal living wage ordinance, it was found that contractors who paid more per hour than lower-paying companies tended to see a reduction in turnover. Other efforts, implemented along with wage increases were also reported to achieve lower turnover. • Contractors who were able to evidence in their proposals a successful track record of operator retention in their pro- posals claim to encounter minimal challenges in securing contracts and in implementing new contracts. At the same time, those agencies that did not include such expectation or requirement in their RFPs claim to value this experience when selecting a bidder. • The comparative importance of cost versus service quality varied somewhat amongst transit agencies as an evaluation criterion, though it is important to note that the agencies valuing service quality over cost consistently reported high satisfaction with their operating contractor(s). For many procurements, the evaluation process is conducted in two independent phases: first a technical evaluation and then a price evaluation; and in at least one case, the two phases were undertaken by two different evaluation committees. • Decreases in operator turnover rates and increases in ser- vice productivity were reported by agencies that selected contractors which evidenced competitive compensation packages and a commitment to maintaining a well-trained, experienced operator workforce. One agency was able to more than double its number of service hours provided as a result of the contractors’ ability to maintain operators who were capable of meeting an increased level of service demand. Whether expressed in evaluation criteria or contractual requirements, it is evident from the research that transit agen- cies that recognize the benefits of using contractors that can 109

City Transit Agency Living or Minimum Wage Standard in RFP Incentives and/or Penalties for Maintaining Adequate Workforce or Covering Runs Mentioned in RFP Evaluation Criteria Columbus, OH COTA Moderate Moderate Moderate Good Dallas, TX DART Moderate Moderate Good Denver, CO RTD access-a-Ride Good Good Good Good Everett, WA Community Transit Kalamazoo, MI Kalamazoo Metro Transit Good Good Los Angeles, CA Access Services Madison, WI Madison Metro Transit Moderate Good Good Nashville, TN Nashville MTA Moderate Moderate Moderate Orange County, CA OCTA Good Good Good Lake Worth, FL Palm Tran Good Moderate Phoenix, AZ Phoenix Public Transit Moderate Moderate Moderate Moderate Moderate Moderate San Diego, CA San Diego MTS Moderate Moderate San Mateo County, CA Redi-Wheels Good Seattle/King County, WA Access Transportation "Stable, Experienced Workforce" Table 10-1. TCRP project F-13 survey respondents indicating moderate or good success with operator recruitment/retainage as a result of procurement/contractual provisions.

attract and maintain a stable, experienced operator workforce attract contractors who either share this recognition or who modify their practices to achieve this goal. The following case studies summarize the approaches taken by 11 selected systems that were studied. Outcomes and expe- riences, as well as a contractor perspective on the changes, are provided. Case Studies Dallas Area Rapid Transit (DART), Dallas, TX DART is the regional transit authority serving the Dallas metropolitan area, including the city of Dallas and 12 sur- rounding cities. DART has approximately 130 bus routes, 45 miles of light rail transit (DART Rail), 75 freeway miles of high occupancy vehicle (HOV) lanes, and an ADA paratran- sit service. DART and the Fort Worth Transportation Author- ity (the T) jointly operate 35 miles of commuter rail transit (the Trinity Railway Express or TRE), linking downtown Dallas and Fort Worth with stops in the mid-cities and DFW Inter- national Airport. Use of Contractors for ADA Paratransit DART’s ADA paratransit service, called Paratransit, is organized as follows: DART staffs a call center that includes the reservations, scheduling and dispatch function for the entire system. DART also provides staff for contract admin- istration, eligibility certification, and customer service func- tions. Veolia Transportation, under contract to DART, oper- ates the service with a fleet of 186 vehicles supplied by DART. The contract payment structure includes a monthly fixed amount to cover fixed costs, a variable hourly rate for opera- tions, plus reimbursement for tolls. Procurement/Contractual Provisions In the survey, DART reported that it had moderate success with specifying a minimum wage rate in its procurement and contract documents and significant success with liquidated damages for uncovered runs. With respect to the minimum wage requirement, DART staff stated the following: We make it clear that we expect experienced, trained opera- tors; by setting the bar high, we have a better chance securing such a workforce through the contract. As a rule, happy people make contented workers. A contented workforce makes good decisions and they are reliable. Requiring the contractor to pro- vide a minimum or living wage helps to ensure a more contented workforce. Left to themselves, contractors will try to keep wages as low as possible. This low rate will eventually cause personnel to leave. The turnover rate increases and valuable experience and skills are diluted or lost. In DART’s solicitation, the two provisions related to the workforce were the following: Operators Minimum Wage Rates and Incentive Programs All persons employed as operators for performance of this con- tract or any subcontract hereunder shall be paid not less than $10.00 per hour while in training. The minimum wage standard imposed is a minimum and the Contractor is required to employ a systematic evaluation program and benefit package designed to encourage retention of well qualified and good performing oper- ators for the duration of the contract. Toward this end, the Con- tractor shall establish progressive wage increases beyond the train- ing level and offer such increases to employees who successfully graduate from the training program. Operators and mechanics shall also be provided a minimum of three (3) sick days as part of the benefit program. Failure to comply with this provision shall constitute noncompliance with the terms of this contract. Schedule of Liquidated Damages for Uncovered Runs Liquidated damages in the amount of $350 per occurrence shall be assessed for unavailability of operators or vehicles at Contractor scheduled operator report/clock-in time. The Contractor Perspective The Regional Manager for Veolia Transportation and for- mer General Manager for this contract felt that the minimum wage rate/sick day provision has contributed more signifi- cantly to operator retainage than the uncovered run provision. He reported that competitive wage rates and benefits attract a “higher-quality” job applicant which results in less voluntary attrition, whereas the liquidated damages for uncovered runs are more to ensure that operators depart on time. Reported Results The Regional manager reported that voluntary operator attrition totals no more than five or less operators per year since the RFP/contractual provision for minimum wage and sick day benefits was instituted. Denver Regional Transportation District (RTD), Denver, CO The Regional Transportation District (RTD) is the regional transportation agency for the Denver metropolitan area. The RTD has 140 local, express, and regional bus routes and six light rail lines that provide 35 miles of light rail service. The RTD also has three demand-response services: (1) call-n- Ride, a general public dial-a-ride in several neighborhoods that cannot sustain fixed-route bus service; (2) access-a-Ride, its ADA paratransit services; and (3) access-a-Cab, a supple- mental (non-ADA) taxi subsidy program that is available to access-a-Ride customers. 111

Use of Contractors for ADA Paratransit RTD’s ADA paratransit service is organized as follows: RTD contracts with First Transit to operate its paratransit call center. As part of this contract, First Transit provides reser- vations, scheduling, and dispatching services for access-a- Ride, and reservations for access-a-Cab. RTD has separate contracts with four different carriers to operate access-a-Ride services in Denver: Global Transportation, MV Transporta- tion, Special Transit, and Coach USA. Special Transit is also contracted for service in Boulder, CO. The call center con- tractor develops the daily schedules and transmits daily run manifests to each of the contractors. Procurement/Contractual Provisions In the survey, RTD reported that it had had significant suc- cess with (1) specific evaluation criteria for a stable experi- enced workforce; (2) requiring proposers to provide wage scales, and (3) specifying liquidated damages for uncovered runs. With respect to these strategies, the RTD access-a-Ride service manager attached the following note: Points are assigned via the evaluation process for a range of issues such as understanding and approach to the RFP, firm and staff experience and costs. While we do not mandate specific wages, we do identify current wage scales. Liquidated damages and incentives are designed to motivate contractors to perform within acceptable service standards. The relevant provisions in RTD’s paratransit RFP are: • Proposal Evaluation Criteria for Wage Rates. Proposers who state that they will maintain (or increase) the current wage scales are given points accordingly. Proposers who state that their wage scales are below the current ones are marked down. The purpose of this is to maintain a consis- tency in the wage scale from one contract to the next. RTD views this evaluation criterion as a significant contributor to this goal, which in turn has contributed to low operator attrition rates. • Contract incentives and/or penalties related to maintain- ing an adequate vehicle operator workforce or covering all runs assigned. As a contract provision, RTD assesses a $500 fine for each uncovered run, whether it is a result of not enough operators and/or not enough vehicles. On days when there are an unexpected and large number of operator call-outs, a carrier may not be able to cover all of the runs. In this circumstance, RTD allows a carrier to re-distribute trips from light runs to other runs where these trips might fit. However, in some cases, this may not be possible, and the carrier has no other choice but to give back the run. In this case, a $500 fine is assessed per “give-back.” This provision is thus an inducement for a carrier to size an extra board correctly and for the carrier to have a back-up plan for call- ing in operators willing to work overtime. The Contractor Perspective The Executive Director of Special Transit had a slightly dif- ferent take on the provisions in the RTD’s procurement/ contractual document, indicating that the provisions had per- haps less significant impact on vehicle operator recruitment in actual practice but also acknowledging that the liquidated damages for uncovered runs did provide an impetus for Spe- cial Transit’s maintaining a sufficient roster of operators. She stated that the challenge for Special Transit is to balance the potential for liquidated damages against the cost of having excess operators, since the Call Center contractor (First Tran- sit) can cut runs at any time. She added that RTD’s practice of providing transit passes to contractor operators (at no cost to the operators) had a positive impact on Special Transit’s ability to recruit and retain operators. Reported Results Special Transit reported an annualized operator turnover rate of about 35% for its access-a-Ride service in Denver. Interestingly, the Executive Director also reports a 0% turn- over rate for its access-a-Ride operators in Boulder. She attributed this dramatic difference to the fact that the Denver operators are unionized, and the Boulder operators are not (Special Transit inherited a union shop when it took over the entire regional service in 2000 on an emergency basis for RTD). She further explained that the seniority-based shift- bid process (which is required by the union agreement) results in the newer operators getting the worst shifts (nights, week- ends, etc.), and that the operator turnover in Denver is most acute among the newer operators. In contrast, Special Tran- sit has more flexibility in matching individual operators’ needs with shift requirements in the Boulder operation. Attrition Rate. RTD reported that its contractors have experienced operator attrition rates ranging from 20% to 35%. Run Coverage. RTD indicated that since the run coverage provision was instituted, the average number of “give-backs” have been reduced from 5 per week to perhaps 1 per month. Community Transit, Everett, WA Community Transit is a special-purpose municipal corpo- ration providing public transportation services in Snohomish County, WA. Community Transit’s services include fixed-route transit, vanpool, ride-matching, and paratransit (DART). In 2004, over 8 million passenger trips were made on the system, and Community Transit carried 57% of all Snohomish County- 112

Seattle commuters to work and back. The entire bus fleet is wheelchair accessible, either by low-floor ramped vehicles or buses equipped with wheelchair lifts. Dial-a-Ride Transportation (DART) is Community Transit’s ADA paratransit service. With an existing fleet of 53 vehicles, the service operates 7 days a week, covers 1,400 square miles, and provides an average of 800 one-way trips per weekday. Use of Contractors for ADA Paratransit DART service is operated by Senior Services of Snohomish County (SSSC), a private non-profit organization, through a contract with Community Transit since 1981. Although the contractor manages all day-to-day operations, the hardware and software, including an automated client file, reservation, mapping, scheduling, and dispatch system, is provided by Community Transit. Vehicles are also provided by Commu- nity Transit, but maintenance is provided by the contractor. SSSC manages the day-to-day operations of the service. The organization’s responsibilities include customer eligibility screening, customer service, scheduling, reservations, routing, dispatching, supervision, fare collection, and operations. Procurement/Contractual Provisions Community Transit places a high value on service quality when selecting contractors, recognizing operator pay as an indicator of that quality. The agency’s Contracted Services Coordinator stated the following: We make it clear in our RFPs that we expect experienced, trained operators; by setting the bar high, we have a better chance of securing such a workforce through the contract. While the expectation of paying operators well and valuing employment longevity is not explicitly indicated in the RFPs, it acts as a strong determinant in selecting winning proposals. For example, Community Transit’s most recent contractor was chosen largely because its proposal touted high wages for operators and extremely low turnover. Community Transit’s RFPs also include a detailed set of serv- ice standards, incentives, and liquidated damages, although Community Transit reported that the incentives do not have a significant impact on service. One of the liquidated dam- ages provisions relates to run coverage. The following is an example: Contract incentives and/or penalties related to maintaining an adequate vehicle operator workforce or covering all runs assigned The Contractor shall provide adequate staffing to ensure that staff or manpower shortages are compensated for with qualified personnel in a manner which does not detract from staffing lev- els in other areas of this project. The RFP includes the following language regarding penal- ties for poor performance by the Contractor: One hundred dollars ($100.00) for each occasion that the Contractor does not have the number of vehicles available for revenue service as specified by Community Transit in operating service. The Contractor Perspective The General Manager of Senior Services of Snohomish County stated that the high expectations for experienced operators and high wages are “definitely a draw” when recruit- ing operators. He explained that before hiring operators, they go through intensive training, and 60% “make it out.” The agency looks for vehicle operators that have the following: “good driving records, good people skills, and want to assist people. Those are the ones that stick around a long time.” The agency reported the turnover rate for operators is about 20–30%, depending on the month. The General Manager reported that Senior Services meets the goals set forth by Community Transit. The 91% on-time performance standards are always met, and the general man- ager stated that they “never miss a trip.” He explained: “We meet all goals. We don’t turn anybody down. We really don’t have financial disincentives happen.” Although he is aware that the financial disincentives exist in the contract, the main motivation for Senior Services is to be a good service provider. Reported Results Turnover has not been a problem for Community Transit since they began contracting with Senior Services of Sno- homish County, the contractor who proposed to provide high operator wage rates and to maximize operator retention to the extent possible. It was noted that Senior Services only loses one or two operators a month out of about 70 operators. Community Transit believes that the combination of RFP language requiring a stable, experienced operator workforce and the contractor’s natural desire to treat operators well and provide them with sufficient training has contributed to a paratransit system that provides high quality, on-time ser- vice, and satisfied and experienced operators. Access Services, Inc. (ASI), Los Angeles, CA Access Services (ASI) is a local public agency organized as a public benefit corporation that operates ADA complemen- tary paratransit service. ADA paratransit service is provided for the Los Angeles County Metropolitan Transit Authority (LACMTA) and 40 other fixed-route transit operators in Los Angeles County pursuant to the Los Angeles County Coordi- nated Paratransit Plan. In addition to operating the ADA 113

complementary paratransit service, known as Access Para- transit, ASI acts as the Los Angeles County Consolidated Transportation Service Agency (CTSA). It is governed by a nine-member board appointed by the Los Angeles County municipal fixed-route operators, the Los Angeles County local fixed-route operators, the City of Los Angeles, the County of Los Angeles, the Transportation Corridor Representatives of the Los Angeles branch of the League of Cities, the Los Angeles County Commission on Disabilities, and the Coalition of Independent Living Centers. Use of Contractors for ADA Paratransit Service is provided by six principal contractors in six regions as shown in Table 10-2. Requests for service are auto- matically routed to the appropriate carrier based on the cus- tomer’s telephone number. Each of the contractors provides turn-key services in their region. Each provider except for MVT in the Southern region is responsible for taking reservations, verifying customer eli- gibility, scheduling rides onto vehicles, and providing service using ASI-certified vehicles and operators. GPI accepts all reservations for the West/Central and Southern regions and passes on a portion of the reservations for the Southern region to MVT. Each provider is responsible for all trips originating in its region regardless of whether the destination is in the region or another one within the Los Angeles Basin. Trips between the Basin, Santa Clarita, and the Antelope Valley require a transfer. Service is provided using a mix of ASI-owned vehicles, provider-owned vehicles dedicated to Access service, and taxi- cabs certified for Access Paratransit service. ASI manages the system, providing contractor oversight and monitoring, and also directly provides customer service functions, fleet management functions (for its own vehicles), community outreach functions, and all administrative and planning functions. Procurement/Contractual Provisions Access Services reported in the survey that it had moderate success with the inclusion of “living wage” and benefit infor- mation in the RFP. Evaluation criteria are used to evaluate proposals, and points are earned on a sliding scale. Criteria are based on the following: • Comparability of pay (to other carriers); • Quality of the heath care plan (e.g., the percentage split of premiums between the company and the operator); • Inclusion of medical, dental and vision benefits versus medical only • Family package; • Number of vacation, sick and PTO days; • Educational reimbursement; and • 401K/retirement plan. In its paratransit solicitations, Access Services supplies wage information by position for the current contractor; this includes the starting hourly rate, the top hourly rate, and any qualifying notes, such as whether there are annual or merit increases. The two most relevant provisions in the solicitations are as follows: Expectations for Operator Wages / Retention The selected Proposed shall establish and maintain an employee pay and benefit structure, which will serve to attract and retain high-quality employees for all positions required to successfully perform the work. Proposer must submit rates and graduated rate increases along with timelines for the increases. Proposal Evaluation Criteria Access Services will substantially downgrade proposals that do not incorporate appropriate wage and benefit packages that will facilitate successful recruitment and retention of qualified employees. Access Services will also downgrade proposals that do not provide for reasonable medical benefits for all full time employees. Proposer should carefully consider adequate and comparable rates of compensation, public sector and private sec- tor, which exist for similar positions within Los Angeles County. Proposals are evaluated with both qualitative and quanti- tative measures. The quantitative measures are as follows: Quality of Technical Approach 30% Paratransit Operating Experience 20% Cost/Price Proposal 20% Employee Pay and Benefits 15% Qualifications and Availability of Proposed Staff 15% 114 Region Contact Providers San Fernando Valley (Northern) MV Transportation (MVT) Eastern San Gabriel Transit (SGT) West/Central Global Paratransit Inc. (GPI) Southern Global Paratransit Inc., and MV Transportation Santa Clarita Santa Clarita Transit Authority Antelope Valley Antelope Valley Transit Authority (AVTA) Table 10-2. ASI service regions and contractors.

The Contractor Perspective MV Transportation’s General Manager reported that wage scales have had a positive impact on vehicle operator retention, but he said that because of the competitiveness of the procure- ment process, the company is unable to increase hourly wages. However, operator retention is encouraged through increasing wage scales at 6 month and yearly increments. In addition, the company offers incentive programs for retention, such as a financial retention bonus, paid at multiple stages up to an operator’s first 6 months of work. He also reported that the company’s employee referral program has been extremely successful. If an operator refers a new applicant, and if the new hire works for at least 90 days, both receive bonuses. The general manager said that this program also “encourages the experienced operators to be mentors for the new hire referrals.” Despite retention programs, there is about a 45% turnover rate. As far as the evaluation criteria, the general manager sug- gested that “it is a good concept, although the current con- tract was renegotiated due to the current budget crisis.” Reported Results ASI’s Executive Director noted that ASI purposely did not quote a minimum wage rate in their RFP because in Califor- nia, that would constitute ASI being an “implied” employer. However, in the past, ASI has encouraged contractors to set a vehicle operator wage above the minimum ($8.50), but in many cases, the wages came in at the figure. She said that ASI is exploring how to actually set the wage without becoming the implied employer of the operators. The Executive Director also was quick to point out though that operator wage rates alone do not tell the entire story, reporting that the contractor with highest operator wage rates in the system was one of the poorest performers, and the con- tractor with the lowest wage rates was one of their best per- formers. In the survey, ASI noted that many contractors are still focused on submitting the “lowest bid” since operator wages make up the majority of the overall cost. She also men- tioned that some of her contractors include a benefits pack- age that provides English-as-a-second-language benefits, an operator recognition program, and “stepping stone” career programs and internships that pave the way for operators to advance to senior/management positions. Madison Metro Transit, Madison, WI Madison Metro Transit is the municipal transit provider for the city of Madison, WI, covering an area of 60 square miles. With more than 450 full-time employees, Madison Metro Transit serves an average of over 54,000 daily passenger trips during the school year. The service has 56 fixed-routes and operates a fleet of 204 buses. Its ADA paratransit service, Metro Plus, provides nearly 300,000 annual trips to 1,774 clients. Metro also operates Group Access Service (GAS) for Madison, Middleton, and Monona adults who live in their own homes and apartments, are over 60 years old, and have a physical or sensory disability. GAS is a scheduled, routed, group service to meal sites, farmers’ markets, pharmacies, libraries, and grocery stores. Use of Contractors for ADA Paratransit Beginning in 2009, nearly a quarter of Metro Transit’s paratransit operations are in-house, with the remainder of the work contracted to Transit Solutions, Badger Cab Com- pany, and Badger Bus. All customers call Metro Transit, and transit agency staff either serves the customer themselves or delegates the work to one of the three contractors. Transit Solutions operates about 20% of the ADA service on week- days only, with no weekends or holidays; Badger Bus handles about 30% of the requests on weekdays, nights, and week- ends; and Badger Cab provides ambulatory services and takes over leftover ADA paratransit runs, about 23%. Procurement/Contractual Provisions There is a municipal and county-wide living wage ordi- nance that is articulated in Madison Metro’s RFPs. It states: LIVING WAGE (Applicable to contracts exceeding $5,000). CONTRACTOR agrees to pay all employees employed by CONTRACTOR in the performance of this contract, whether on a full-time or part-time basis, a base wage of not less than CITY minimum hourly wage as required by Section 4.20, Madison General Ordinances. One of the contractors, Transit Solutions, adds to this liv- able wage by providing benefits and an incentive plan that pays operators for safety and attendance. Madison Metro has also established standards in its con- tracts with penalties on a per-trip basis. Since 2006, this sys- tem of collecting performance data from contractors and then generating a percentage of compliance has been used to calculate this per-trip penalty fee: It is the responsibility of CONTRACTOR to make every effort to comply with all service standards established by CITY. CITY has established a service standard of passenger pick up no later than twenty (20) minutes after the scheduled time. For each instance in which a passenger is picked up outside of this service standard, the following reimbursement will be applied: On-Time Performance Reimbursement 94% On-Time 100% of the reimbursement rate 90–93% On-Time 98% of the reimbursement rate Less than 90% On-Time 90% the reimbursement rate 115

While the CITY pays the lesser of the cost of the ride or $3.00 for each “no show” a passenger has when service is provided by the CONTRACTOR on a per trip basis, this cost must be absorbed by the contractor if they are over twenty minutes late. The Contractor Perspective The owner of Transit Solutions commented that the “liv- ing wage” outlined in the contract is “great because it gives people a higher starting wage.” Transit Solutions also has benefits for employees like health insurance, retirement pack- ages, and paid holidays, which all help to maintain a steady workforce. In addition to the incentive plan in the contract, the owner noted that Transit Solutions has an incentive plan for vehicle operators that: “pays people for safety and atten- dance . . . all of those things play into recruitment and reten- tion.” The company uses the financial incentives in the con- tract with Metro Transit in a similar fashion with its other employees. The owner stated, “Overall, I think the system they [Metro Transit] have is reasonable and it works.” Reported Results Contractors are almost always within the 94% to 100% on- time rate. Madison Metro Transit’s Paratransit Program Man- ager reported that rarely, if ever, is the 10% reduction penalty enacted. Contractors work hard to meet the 94% compliance rate and have found that the only time they fall short is dur- ing bad weather (in which case the penalty is waived by the City). In March 2009, Transit Solutions achieved a 98% on- time performance rate. It was noted that paying a living wage has definitely helped to retain vehicle operators. The Paratransit Program Manager said she believes this higher pay has also contributed to higher quality driving and service. She stated, “Operators stay when there is better pay, and they drive better, too.” Vehicle operator turnover at Transit Solutions is extremely low. In 11 years of business, over half of Transit Solutions’ orig- inal operators remain. The owner attributes this to a combi- nation of good wages, benefits, and hands-on management; he and his partner are present and available each day, and they make an effort to treat people well and with respect. They even maintain a special account for employee pay advances which are paid back via paycheck deduction at no interest. The owner stated: “We do things to help our work- ers and make it easier and more enjoyable to work here. And it really works.” Orange County Transportation Authority (OCTA), Orange County, CA The Orange County Transportation Authority (OCTA) serves Orange County through bus, commuter rail, Express Lanes, and paratransit service. OCTA operates approximately 80 bus routes, covering every city in Orange County and sev- eral cities in Los Angeles County. OCTA also operates express service to Los Angeles and to San Bernardino and Riverside counties. OCTA’s ADA paratransit service is called ACCESS. Most recently, in 2007, OCTA initiated a Vanpool Program to provide assistance to commuters who work in Orange County and live in neighboring counties. Use of Contractors for ADA Paratransit Until July 2009, OCTA’s fixed-route, express bus, and ADA paratransit service were operated by Veolia Transporta- tion. After July 2009, Veolia Transportation began running only the ADA paratransit service, ACCESS, utilizing a fleet of 350 vehicles. Veolia provides a turn-key operation, providing all day-to-day operations and vehicle maintenance on OCTA provided vehicles. OCTA has a managerial role and has close oversight on all service provided by Veolia. Procurement/Contractual Provisions In the survey, OCTA reported that it had significant suc- cess with specifying a minimum or “living wage” rate in its procurement and contract documents, as well as including language regarding an experienced workforce and incentives or penalties in the contract related to maintaining an ade- quate vehicle operator workforce. OCTA also reported that they include strict and specific evaluation criteria in the RFP. OCTA includes the following language to indicate its expec- tations for vehicle operator wages/retention: AUTHORITY recognizes the expense and negative effect of employee turnover. Therefore, the CONTRACTOR must demon- strate they have an acceptable recruitment and hiring program that is intended to minimize employee turnover and retain a high quality work force. Several service performance standards, incentive payments, and penalties are also included, as shown in the Table 10-3. The Contractor Perspective The Project Director for Veolia reported a low turnover rate of 7%. He reported that there is a dedicated commitment to training which has paid off, as evidenced by the high retention rate. He said that with better training the company sees better results. He noted that another reason for the high retention is the benefits package provided to employees, including good health care, a living wage, and help with flexibility on travel to work, which is an issue in and around the Los Angeles area. The Project Director reported that the incentives outlined in the scope of work are hard to achieve. He said: “In 36 months, 116

we’ve received only one performance incentive. They are chal- lenging incentives to meet.” He explained that the complaint standard is the toughest and perhaps the strongest in the coun- try, so the company has never met it. Veolia is striving to meet it and is establishing a new program with increased training for better results. Reported Results OCTA’s Field Administrator commented that the contrac- tor performs well according to obligations outlined in the scope of work. He reports that good communication between the contractor and the agency is the best way to have a shared understanding of expectations, since language in a contract can be tricky and interpreted in more than one way. He said that since April 2007, Veolia has maintained an on-time per- formance level average of 93%. Palm Tran CONNECTION, Lake Worth, FL Palm Tran, Palm Beach County’s public transportation service, provides fixed-route public bus transportation and coordinated paratransit service. Fixed-route bus service is provided on over 30 routes, serving nearly all destinations in the county. Buses generally operate weekdays with 30-minute headways during peak rush hours and 60-minute headways during mid-day and on the weekends. Palm Tran CONNECTION is the county’s shared ride, door- to-door transportation specialized service. CONNECTION schedules all trips, prepares vehicle manifests, handles cus- tomer concerns, determines eligibility, and monitors the per- formance of transportation providers. Veolia runs a turn-key operation, performing all ADA paratransit functions. Use of Contractors for ADA Paratransit Palm Tran contracts with MV Transportation, Palm Beach Metro Transportation, and Two Wheels Transportation. The contractors operate 190 vans, providing door-to-door service for senior citizens, persons with disabilities, and persons with low-income. The service provides an average of 4,025 sched- uled passenger trips each weekday. Veolia runs a turn-key operation and performs all ADA paratransit functions. Procurement/Contractual Provisions Palm Tran includes language in RFPs indicating that a stable, experienced vehicle operator workforce is expected. Under- standing that a great deal of operator retention is determined by compensation, Palm Tran gives preference to respondents with the highest operator pay rates. Palm Tran also includes a specific liquidated damage fee in contracts to offset the cost of uncovered runs. While this fee has provided an effective incentive for contractors to cover runs, there have not been many problems, and the fee penalty has been scarcely implemented. The Contractor Perspective The General Manager of MV Transportation believes that factors such as benefits, work atmosphere, and communica- tion are key ingredients in maintaining a stable and experi- enced workforce. MV Transportation takes extra care in mak- ing the company an enjoyable place to work by providing full-benefits, substantial vacation time, and an open door pol- icy with all managers. The general manager reported that the company no longer has to spend significant time and money 117 Category Standard Incentive Penalty ACCESS On Time Performance 95% or above $5,000 for each percentage point above 96% on time $5,000 for each percentage point below 94% on time Service Delivery Failure All qualified requests must be served. None $1,000 per occurrence Call Center Hold Time Average of 90 seconds or less None $1,000 deduction if monthly average exceeds 90 seconds Call Center Valid Complaints No more than 1 valid complaint per 1,000 passengers each month None $100 for each valid complaint over 1 per 1,000 passengers Accident Report Report all within 24 hours, verbal and written. None $5,000 per accident not reported. Table 10-3. OCTA service standards, incentives and penalties.

recruiting employees because the pay is higher than other companies. MV Transportation increased hourly pay for the Palm Tran contract, and the general manager reported that this has helped to retain operators. The general manager also reported that she aims to main- tain a stable operator workforce and works towards adhering to contract requirements. She uses the liquidated damages clauses set forth in contracts as incentives to provide good service. Reported Results Palm Tran CONNECTION’s Fiscal Analyst reported that, generally, contractors perform well and meet their contractual requirements. There are rarely, if ever, any uncovered runs. Turnover has become less of a problem not only because of the RFP provisions, but as unemployment rates have increased, operators tend to hold onto to their jobs for longer periods of time. City of Phoenix Public Transit Department, Phoenix, AZ The City of Phoenix Public Transit Department is responsi- ble for the overall supervision of the City of Phoenix Transit System. The City manages local buses, Phoenix Dial-a-Ride paratransit, Reserve-a-Ride senior service, RAPID and Express commuter services, and several neighborhood circulators. The City’s paratransit service is called Dial-a-Ride. The service operates seven days a week in almost all areas within Phoenix city limits. Dial-A-Ride serves individuals who are ADA paratransit eligible as well as seniors. ADA paratransit customers are encouraged to call at least one day in advance for service; where possible, same day demand service is also available after reservation requests have been scheduled. The City also manages Reserve-a-Ride, a specialized, door- to-door transportation service for senior citizens over 60 years old and certified persons with disabilities. Reserve-a-Ride pro- vides transportation to senior centers, medical appointments, social service agencies, and shopping. The primary responsi- bility of the service is to provide transportation to and from senior centers, and other trip requests are accommodated wher- ever possible. These two services, Dial-a-Ride and Reserve-a- Ride, are operated by the same contractor with the same fleet of vehicles. Use of Contractors for ADA Paratransit MV Transportation has been the City’s paratransit contrac- tor since 2001. MV Transportation manages all day-to-day operations, including maintenance on over 100 vehicles and scheduling service for both advance and same-day service requests. Out of the 300 or so MV Transportation employees, about 215 of them are vehicle operators. Procurement/Contractual Provisions In the survey, Phoenix reported that it had moderate success when specifying that a stable, experienced vehicle operator workforce was expected, and also moderate success when including a “livable wage” requirement in its procurement and contract documents. While there is no living wage ordinance in Phoenix, the City understands that a livable wage scale is sig- nificant for job retention and stability. The City’s RFP requests a detailed plan with specific strate- gies for maintaining a stable workforce. The City encourages proposers to be creative in their approach to operator reten- tion, stating that preference will be given to proposers who can successfully demonstrate to City their ability to retain quality operators. In addition to requiring the proposer to outline hir- ing, training, and retraining programs for operators, Section VII of the RFP asks proposers to respond to the following: Discuss the PROPOSER’S philosophy on providing a “livable wage” given the current state of the economy and how the pro- posed employee wage and benefit package and other innovative programs ensure that they meet that standard. Describe in detail the methods to be taken in order to attract and retain the appropriate staffing levels. Include any incentive and/or merit programs to award outstanding employees. Describe in detail the type and level of employment benefits provided or available to employees addressing vacation, sick and other leaves, health and welfare benefits, wage and salary classi- fications and progressions, and employer contributions for all programs for all job categories. When evaluating RFP responses, a points system is utilized. The Director of Transportation Contract Services explained, “Our approach is that we want to make sure the company we hire is going to fulfill our needs as far as service—we take an approach of service over price.” The evaluation criteria out- lined in the RFP are the following: Qualifications 50 points Professional References 50 points Management 150 points Maintenance and Operations Experience 100 points Understanding of Scope 400 points Price 250 points The RFP also provides a system of incentives and sanctions to reward exemplary performance and ensure adherence to performance standards, but the survey indicated that these incentives and/or penalties did not have even a moderate impact on contractor performance. 118

The Contractor Perspective The General Manager for MV Transportation reported that the success it has had working with the City of Phoenix is due to a “successful, true partnership” between the two organiza- tions. He gave credit for the positive working relationship to the City’s understanding of the operation, saying: “[The Director of Transportation Contract Services] knows how our system works—he understands the nuts and the bolts.” The current average wage for an operator is $14.45, which is adequate according to the terms outlined in the RFP. In addition to a reasonable wage, though, the general manager said it is important to look for individuals who are customer- service oriented. He also indicated that a good work environ- ment and other non-monetary rewards have measurable pos- itive effects on turnover. He noted that these methods were helpful in MV Transportation’s response to the City’s RFP requirement of a description of “methods to be taken in order to attract and retain” employees. Annually, MV Transporta- tion in Phoenix sees about a 21% turnover rate. It was noted that 83 of MV’s 180–200 paratransit vehicle operators have over 8 years of experience. Both the City staff and MV General Manager reported that the financial incentives or penalties were not a motivator to provide good service. MV Transportation does adhere to goals outlined by the City, and they have “monitors all over the place,” indicating current levels of on-time performance, aver- age hold time for a customer on the phone, etc. This keeps all personnel informed of the current situation and helps to strive for the best customer service possible. Regardless of whether the motivation for good service is the contract with the city or just good business practice, MV Transportation receives more financial rewards than penalties. The MV General Manager also commented that RFPs and contracts should be specific: “The more specific the agency can be when putting the proposal together and creating the vision that they want, then the end result will be more successful.” Reported Results The contractor for paratransit service has a relatively low turnover rate for a private contracted operation (reported to be 21%). A third of operators have been employed with the contractor for over 8 years. City of Phoenix transportation staff also reported that “this has improved service and produc- tivity by volumes.” The Director of Transportation Contract Services commented, “It definitely improves productivity and service quality when you treat your employees well.” On the books, the City and contractor have yet to experience a day with high numbers of closed runs. Budgeted hours from the most recent contract indicate that the contractor is always able to meet allotted hours, whereas before contractors in pre- vious periods fell short of the requirements due to lack of oper- ators, which caused the City to over-budget. For the past five or so years, the City has been able to maintain its budget pre- cisely. Important to note, immediately prior to the most recent contract with MV Transportation, the City approved a sales tax measure that allocated more money to transit. In just a 2-year period, the City was able to double its number of service hours provided, and the contractor was able to provide an adequate workforce to meet this new induced demand. According to City staff, the greatest challenge when nego- tiating contracts is trying to convince bidders to change their mindset or approach when developing their proposals. He said that most bidders are accustomed to winning a contract based almost entirely on price rather than service. He noted that in the Phoenix process, when reviewing proposals, the price for each bidder was not revealed to the evaluation com- mittee. As a result, the committee was only able to evaluate based on the merits of the proposals. A City staffer expressed: “I feel that we had a successful procurement in that the suc- cessful proposer is still with us and doing a very good job, which was our objective to have them competing on the qual- ity of service, rather than the price. By the way, the successful proposer was not the lowest bidder.” San Diego Metropolitan Transit System, San Diego, CA San Diego Metropolitan Transit System (MTS) is the public transit agency that provides bus and rail services directly or by contract with public or private operators. MTS manages the scheduling, frequency of service, and hours of operation for its existing services covering approximately 570 miles in and around San Diego. Existing passenger services include 82 bus routes, three trolley lines, and ADA paratransit service that together serve over 3 million residents. ADA paratransit service is called MTS Access. Use of Contractors for ADA Paratransit First Transit is the contractor for MTS Access. The contrac- tor is 100% turn-key and handles all operations functions. Vehicles are owned by MTS. Procurement/Contractual Provisions In the survey, MTS reported that it had moderate success including (1) language that a stable, experienced operator workforce was expected; (2) requirements for proposers to provide wage scales, and (3) specific incentives and/or penal- ties for uncovered runs. RFPs include wage standards, which are set to increase or decrease according to the market, thus creating a level playing 119

field for new bidders which allows operators to keep up with the cost of living and retain employees. New contractors must maintain existing operators at current seniority levels. MTS mandates in its contracts that a certain percentage of each invoice is allocated to operators’ benefits. For example, for fiscal year 2011, the minimum wage is $10.14/hour for train- ing, $10.71/hour after training, and $11.27/hour base wage after a probationary period. The contractor is required to con- tribute 5%, or $2.10, from the base wage towards employee benefits. There is also a requirement that all operators who work more than 20 hours per week should have full medical coverage. MTS provides a 10% preference to contractors who are able to prove in proposals that they are able to retain their operator workforce and who agree to retain their current staff upon contract. The evaluation criteria are as follows: Corporate Capacity/Qualifications 10 points of the Firm Corporate Experience 30 points Key Personnel 50 points Facility Plan 20 points Safety and Training Plan 10 points Start-up Plan 20 points Customer Services 20 points Cost and Price 70 points 10% Bidding Preference 23 points MTS also sets performance standards, financial incentives, and liquid damages. These are shown in the Table 10-4. The Contractor Perspective The District Manager at First Transit reported that the livable wages clause included in the RFP helped to drive the company to meet the high standards for wages. The responsible wage requirement “helps maintain a level of wages that are competi- tive” and, in turn, helps to prevent a high turnover rate. The District Manager also commented on the incentives and disincentives included in the RFP. “We have met the highest level of incentive thresholds for productivity for the past four years,” he explains. He said that the incentives and disincen- tives were set “at a level where the dollar level wasn’t significant enough.” He noted that instead of financial motivation, cus- tomer service and good business practice are instead drivers for service. The District Manager noted that the responsible wage requirement only applies to vehicle operators that are not cov- ered by a collective bargaining agreement. First Transit oper- ates under labor contracts now and it is expected that when the company responds to the June 2009 RFP, the responsible wage requirement will not be applicable. Reported Results Despite the focus in the procurement on workforce stability, it was reported that turnover has continued to be a problem over the past few years running at “upwards of 100%” according to the First Transit District manager. With the economic down- turn, the turnover rate has decreased and has been running at about 40% for the past year. San Mateo County Transit District (SamTrans), San Mateo, CA The San Mateo County Transit District is the administrative body for the principal public transit and transportation pro- grams in San Mateo County: SamTrans bus service, Redi- Wheels paratransit service, Caltrain commuter rail, and the 120 Performance Measure Incentive LiquidatedDamages Contractor shall achieve a monthly no- show rate of under 5% $2,000 per each month no-show rate is below 5% Any month in which no-shows are greater than 7.5% may carry a damage of $1,000, and $2,000 in which no- shows are greater than 10% Contractor shall ensure that all trips arrive within the established MTS On-Time Performance Window $5,000 per month may be paid Contractor for each month that 90% or more of trips arrive in the MTS established On-Time Window none Contractor shall ensure that hold times don’t exceed an average of two (2) minutes None $5,000 for each month where average hold times exceed two minutes Table 10-4. MTS performance standards, incentives, and liquidated damages.

San Mateo County Transportation Authority. Caltrain and the Transportation Authority have contracted with the District to serve as their managing agency, under the direction of their appointed boards. The SamTrans fixed-route bus system con- sists of 54 routes (44 operated by the District and 10 contracted to MV Transportation), which carry nearly 50,000 passengers on an average weekday. The District’s paratransit service, Redi- Wheels, transports approximately 1,000 customers every day on 83 buses, vans, and sedans, with some additional taxi ser- vice. RediCoast operates nine vehicles on the coastside and provides about 100 rides each day. Use of Contractors for ADA Paratransit Redi-Wheels, RediCoast, and a portion of fixed-route service are contracted to MV Transportation. For Redi-Wheels service, SamTrans performs ADA eligibility and marketing and owns, maintains, and fuels 59 vehicles. MV Transportation manages the remaining day-to-day operations. MV Transportation provides 15 vehicles, all sedans. MV has about 110 vehicle operators. Procurement/Contractual Provisions In the survey, SamTrans reported that it had significant suc- cess with specifying a minimum wage rate and incentives and disincentives relating to an adequate workforce in its procure- ment and contracting documents. SamTrans emphasizes the importance of an experienced workforce in both the pre-bid meeting and in the RFP, stating specifically that operators must be fairly compensated with competitive wages and ben- efits. While SamTrans legally cannot require a specific pay scale, the transit district consistently places strong emphasis on a stable workforce, and staff monitors the contractor to ensure a competitive wage is provided. The most recent RFP contained a specific section on Para- transit Operator Longevity, which is closely monitored by SamTrans throughout the duration of the contract: It is of paramount importance to the District and in the best interest of its customers that Paratransit Operators are not only properly trained, but gain hands-on experience in their craft. It has been the District’s experience that a high turnover rate among Paratransit Operators reduces overall service quality through lack of efficiency and familiarity with the areas in which they operate. In order to indicate a high level of commitment, a Contractor must encourage and promote longevity of its Paratransit Opera- tors. Proposers are required to complete and submit Appendix D, “Staffing Plan Summary” and Appendix E, “Wage and Benefits Summary,” and disclose a plan to accomplish this end with its Proposal. Proposers should disclose information such as award programs and other incentives offered to their Paratransit. There is also a monetary penalty if the contractor is not able to meet the daily demand or maintain at least a 90% on- time performance level. If the contractor fails to provide an adequate number of vehicle operators to meet the required level of service as defined in the contract, a $1,500 fine is insti- tuted. The contract also clearly states that no trips shall be missed or dropped due to unavailability of operators, and the contractor is fined $500 for each missed trip. The Contractor Perspective The General Manager for MV Transportation reported that “We have a low turnover rate at Redi-Wheels, mainly because we have a very good pay rate and fringe benefits.” Employees receive 100% full health benefits, paid by MV Transportation, which equates to about $10 per hour for health benefits on top of their hourly wage. As a result, the general manager esti- mated that the annual turnover rate is about 10% which he felt was “incredible in our industry.” He also comments on the current economic climate, which has dramatically changed operator recruitment: “Before, it was difficult to find opera- tors in the Bay area because there is so much competition for jobs in other sectors. Now, I’m finding 10–20 people a month looking for employment.” As for financial incentives outlined in the contract, the gen- eral manager reported that bonuses and disincentives in the contract have worked “substantially.” He said that four of the standards, productivity, on-time performance, accidents/ safety, and wait time on the phone, have huge bonuses and repercussions for MV Transportation if the company does not meet the standards. He reported that these financial repercus- sions influence his business decisions, saying “It is cheaper for me to add a person to the reservations taking function than to exceed the standards for wait time on the phone.” Currently, MV Transportation meets Redi-Wheels’ 90% on-time per- formance standard. The general manager said that the com- pany has been at this 90% level for a long time, and he is trying to figure out how to improve it, but so far has been unsuccess- ful. As for productivity, he reported that the service operated at about 1.5 to 1.6 trips per revenue-hour. Reported Results The SamTrans Accessibility Coordinator reported the paratransit contractor experiences extremely low turnover rates, especially in comparison to others in the region. She noted that by paying just $1 to $2 more per hour, operator turnover was reduced significantly, making a clear case that paying a higher wage dramatically reduces turnover. She also noted that she believes the more experienced operators tend to be safer and more efficient, which is both a financial and a community benefit. It was noted that while the monetary penalties have acted as an incentive for on-time performance, they have yet to be leveraged with the current contractor, who has consistently been able to meet the 90% on-time performance rate. 121

SamTrans also recognizes good performance by individu- als and reinforces good behavior by making both the transit district and contractor employees eligible for the “I Made a Difference” award. The award, generally an honor rather than a monetary award, is usually presented by a supervisor to an operator while mid-route. The award has created a good atmosphere and appreciation in the workplace, which was felt by managers to contribute to maintaining a stable vehicle operator workforce. King County Metro Transit (Metro), Seattle/King County, WA King County Metro Transit (Metro) is a public transit agency serving more than 1.7 million residents in King County, Washington. Metro operates a fleet of about 1,300 vehicles, including standard and articulated coaches, electric trolleys, dual-powered buses and hybrid diesel-electric buses that serve an annual ridership of 100 million in a 2,134 square mile area. In addition, Metro operates the largest publicly owned vanpool program in the country, with more than 600 vans providing transportation to 5,000 people every day. Metro also manages Access paratransit service, its ADA paratransit service. The program provides next-day, shared rides within three-quarters of a mile on either side of non- commuter fixed-route bus service during the hours and days of operation those routes are in service. In 2007, Access ser- vice provided over 1.1 million rides with a fleet of 300 vans. Use of Contractors for ADA Paratransit Metro contracts its Access paratransit service call center to First Transit, who manages scheduling, reservations, and dis- patching. Two other private companies are then under con- tract to Metro to provide vehicle operation and maintenance. The service provider contractors are Veolia Transportation, which operates about 70% of the runs, and Solid Ground, a local non-profit organization that operates about 30% of the service. Procurement/Contractual Provisions In the survey, Metro reported that it had moderate suc- cess with including language in the solicitation indicating that a stable, experienced vehicle operator workforce was expected. Metro Transit also noted a specific points system used in the evaluation of prospective contractor proposals. The following language is included in the 5-year service provider contracts: The Contractor shall ensure that sufficient staff are hired and retained to meet this Contract’s service requirements. The County reserves the right to reduce the Contractor’s monthly invoice appropriately for any management or supervisory position such as Project, Operations, Information Service or Maintenance Manager, left vacant for more than sixty (60) Days. The Contractor’s provision of qualified, capable and experi- enced personnel is essential to the performance of its contractual obligations herein. As such, failure to provide suitable personnel consistent with the County’s contractual expectations as set forth herein shall be deemed a material breach of contract and subjects the Contract to immediate termination at the County’s option. The Contractor shall ensure that its employees are qualified, capable and suitable to perform the requirements of this Con- tract and the County reserves the right to provide input to the Contractor in determining the suitability of any employee to con- tinue performing the work pursuant to this Contract. The Con- tractor shall provide all pertinent employee records regarding incidents/accidents, passenger complaints, etc., to King County as soon as possible upon request. The County recognizes that the strength of its transportation program is built upon the strength of its operators. Proposers are asked to consider how they will hire and retain an excellent workforce. Metro assigns points when evaluating RFPs to best analyze the proposed services. Typically, vehicle operator recruitment and retention comprise 18–20% of the total score. Table 10-5, 122 Criteria Points Percent of Total Training program 25 2.5% Plan to recruit, train staff and perform the work 50 5.0% Evaluation of proposed team and key persons 45 4.5% Proven ability to collaborate with contractor’s staff 20 2.0% Plan to transition staff who are currently employed with another operator so that service is not disrupted 75 7.5% Record keeping and retention plan 25 2.5% Customer service plan 75 7.5% Pricing 200 20.0% Other (specifics in contract) 515 51.5% Table 10-5. King County Metro proposal evaluation criteria and points.

adapted from a recent RFP, shows the evaluation criteria and points. Metro also includes a liquidated damage for runs that are dropped due to a lack of vehicles or operators. The relevant section reads as follows: The Contractor acknowledges that the provision of services pursuant to this Contract entails providing specialized, public transportation services, and that it is essential that safe, reliable, and efficient service is provided at all times. Liquidated damages may be assessed, at the option of the County, in the circum- stances detailed in the table set forth below. Reported Results Metro indicated that it is difficult to determine the impacts of these procurement strategies at this point because the con- tracts have just been awarded. A previous contract contained only minimum wage standards, which seemed to raise issues as several of the contract providers have had union repre- sented operators. In addition to increasing wage require- ments in the latest RFP, Metro removed the incentives related to run coverage that were included in past contracts. They indicated that the incentives in prior contracts related to run coverage didn’t seem to affect contractor behavior, so they replaced them this time around with liquidated damages. It was noted that vehicle operator turnover is a significant problem for King County. A commonly cited issue in retain- ing paratransit operators is that they often leave the industry for higher paying industrial jobs since they are required to also maintain commercial drivers’ licenses. Metro is considering eliminating the CDL requirement, but still requiring the train- ing to address the same content as in the CDL training. It was noted that operator retention has been better at Solid Ground. Metro indicated that this appeared to be partly due to the more extensive fringe benefits provided by this contractor. Metro managers noted that they have recently established a new bid model with flexible start times which can vary within 1–2 hours per day. Operators will receive notification the day prior to service as to when they will begin work the following day. More and more operators have been sent home before a shift’s end when late cancellations have allowed routes to be closed early and rides to be moved. 123 Item Requirement Liquidated Damage - Cost 1 Route dropped or reassigned due to unavailable vehicle or operator Perform all routes VSHs as assigned $1.5 times cost for replacement service per VSH

TRB’s Transit Cooperative Research Program (TCRP) Report 142: Vehicle Operator Recruitment, Retention, and Performance in ADA Complementary Paratransit Operations provides guidance for understanding the relationships that influence and enhance operator recruitment, retention, and performance in Americans with Disabilities Act (ADA) complementary paratransit services.

Appendixes to TCRP Report 142 were published electronically as TCRP Web-Only Document 50 : Survey Instrument, Productivity Charts, and Interview Protocol for Case Studies for TCRP Report 142.

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47 case interview examples (from McKinsey, BCG, Bain, etc.)

One of the best ways to prepare for   case interviews  at firms like McKinsey, BCG, or Bain, is by studying case interview examples. 

There are a lot of free sample cases out there, but it's really hard to know where to start. So in this article, we have listed all the best free case examples available, in one place.

The below list of resources includes interactive case interview samples provided by consulting firms, video case interview demonstrations, case books, and materials developed by the team here at IGotAnOffer. Let's continue to the list.

• McKinsey examples
• BCG examples
• Bain examples
• Deloitte examples
• Other firms' examples
• Case books from consulting clubs
• Case interview preparation

Click here to practise 1-on-1 with MBB ex-interviewers

1. mckinsey case interview examples.

• Beautify case interview (McKinsey website)
• Diconsa case interview (McKinsey website)
• Electro-light case interview (McKinsey website)
• GlobaPharm case interview (McKinsey website)
• National Education case interview (McKinsey website)
• Talbot Trucks case interview (McKinsey website)
• Shops Corporation case interview (McKinsey website)
• Conservation Forever case interview (McKinsey website)
• McKinsey case interview guide (by IGotAnOffer)
• McKinsey live case interview extract (by IGotAnOffer) - See below

2. BCG case interview examples

• Foods Inc and GenCo case samples  (BCG website)
• Chateau Boomerang written case interview  (BCG website)
• BCG case interview guide (by IGotAnOffer)
• Written cases guide (by IGotAnOffer)
• BCG live case interview with notes (by IGotAnOffer)
• BCG mock case interview with ex-BCG associate director - Public sector case (by IGotAnOffer)
• BCG mock case interview: Revenue problem case (by IGotAnOffer) - See below

3. Bain case interview examples

• CoffeeCo practice case (Bain website)
• FashionCo practice case (Bain website)
• Associate Consultant mock interview video (Bain website)
• Consultant mock interview video (Bain website)
• Written case interview tips (Bain website)
• Bain case interview guide   (by IGotAnOffer)
• Digital transformation case with ex-Bain consultant
• Bain case mock interview with ex-Bain manager (below)

4. Deloitte case interview examples

• Engagement Strategy practice case (Deloitte website)
• Recreation Unlimited practice case (Deloitte website)
• Strategic Vision practice case (Deloitte website)
• Retail Strategy practice case  (Deloitte website)
• Finance Strategy practice case  (Deloitte website)
• Talent Management practice case (Deloitte website)
• Enterprise Resource Management practice case (Deloitte website)
• Footloose written case  (by Deloitte)
• Deloitte case interview guide (by IGotAnOffer)

5. Accenture case interview examples

• Case interview workbook (by Accenture)
• Accenture case interview guide (by IGotAnOffer)

6. OC&C case interview examples

• Leisure Club case example (by OC&C)
• Imported Spirits case example (by OC&C)

7. Oliver Wyman case interview examples

• Wumbleworld case sample (Oliver Wyman website)
• Aqualine case sample (Oliver Wyman website)
• Oliver Wyman case interview guide (by IGotAnOffer)

8. A.T. Kearney case interview examples

• Promotion planning case question (A.T. Kearney website)
• Consulting case book and examples (by A.T. Kearney)
• AT Kearney case interview guide (by IGotAnOffer)

9. Strategy& / PWC case interview examples

• Presentation overview with sample questions (by Strategy& / PWC)
• Strategy& / PWC case interview guide (by IGotAnOffer)

10. L.E.K. Consulting case interview examples

• Case interview example video walkthrough   (L.E.K. website)
• Market sizing case example video walkthrough  (L.E.K. website)

11. Roland Berger case interview examples

• Transit oriented development case webinar part 1  (Roland Berger website)
• Transit oriented development case webinar part 2   (Roland Berger website)
• 3D printed hip implants case webinar part 1   (Roland Berger website)
• 3D printed hip implants case webinar part 2   (Roland Berger website)
• Roland Berger case interview guide   (by IGotAnOffer)

12. Capital One case interview examples

• Case interview example video walkthrough  (Capital One website)
• Capital One case interview guide (by IGotAnOffer)

13. Consulting clubs case interview examples

• Berkeley case book (2006)
• Columbia case book (2006)
• Darden case book (2012)
• Darden case book (2018)
• Duke case book (2010)
• Duke case book (2014)
• ESADE case book (2011)
• Goizueta case book (2006)
• Illinois case book (2015)
• LBS case book (2006)
• MIT case book (2001)
• Notre Dame case book (2017)
• Ross case book (2010)
• Wharton case book (2010)

Practice with experts

Using case interview examples is a key part of your interview preparation, but it isn’t enough.

At some point you’ll want to practise with friends or family who can give some useful feedback. However, if you really want the best possible preparation for your case interview, you'll also want to work with ex-consultants who have experience running interviews at McKinsey, Bain, BCG, etc.

If you know anyone who fits that description, fantastic! But for most of us, it's tough to find the right connections to make this happen. And it might also be difficult to practice multiple hours with that person unless you know them really well.

Here's the good news. We've already made the connections for you. We’ve created a coaching service where you can do mock case interviews 1-on-1 with ex-interviewers from MBB firms . Start scheduling sessions today!

The IGotAnOffer team

The winners of the 2024 Procura+ Awards are now out!

Showcase your good procurement practice, download the procura+ manual, guidance for any european public authority on how to implement sustainable procurement, check out the procura+ case study series, keep watching for new case studies of procura+ participants putting spp into action, join the procura+ network, any public or semi-public authority can join. find out how, procura+ case studies.

Procura+ Case Studies showcase replicable sustainable and innovation procurement approaches and strategies by our participants.

The case studies range from examples of procurement in action to procurement policies and programmes.

SOUTH MORAVIAN REGION

Combining procurement models for green and healthy buildings

The South Moravian Region identified the need to build a new sanitarium for children with respiratory diseases. The intention was to give the market the opportunity to show the best they can offer to make the building as aesthetic, user-friendly, and energy-efficient as possible. To test clarity and feasibility of the planned procedure, the project was introduced to the market using preliminary market consultation. This was the Procura+ Award honourable mention in 2021 Sustainable Procurement of the Year.

Download the case study

MURCIA HEALTH SERVICE

InDemand, a new demand-driven co-creation model that helps to procure innovation in public organizations

The European project inDemand brought together procurers from 3 European regions (Murcia, Paris and Oulu) to test a new co-creation model - inDemand - which is presented as being leaner, faster and requiring less organisational resources and overheads through pre-commercial procurement (PCP), and is therefore more suited to rapidly changing technologies, like digital solutions. So far, 22 innovation projects have tested the model, including one led by the Murcian Health Service (SMS) called EPICO (which stands for Epilepsy Communication Channel). This was the Procura+ Award winning tender in 2021 for Outstanding Innovation Procurement in ICT.

CITY OF COPENHAGEN

Supplying seasonal and diverse organic fruit and vegetables

The City of Copenhagen is dedicated to ensuring its food and catering service is healthy, sustainable and appetising. The City has a target to supply 90% organic food across its 900 municipal canteens. In 2014 the municipality ensured that bids for fruit and vegetable contracts would include a variety of different sorts, varieties and types. This was the Procura+ Award winning tender in 2016 for Sustainable Procurement of the Year.

TRANSPORT FOR LONDON

Innovative lighting procurement for London’s Underground network

In 2015, Transport for London (TfL) sought to reduce the whole life-cycle cost of lighting the London Underground network. The procurement calculated external costs including installation, maintenance, energy use, carbon and cleaning costs. Indicative results suggest a 25% saving on whole life-cycle costs, and significant reductions in energy consumption. This was the Procura+ Award winning tender in 2016 for Innovation Procurement of the Year.

RIJKSWATERSTAAT

Sustainable Reconstruction of the Motorway A6

Rijkswaterstaat (RWS) procured works and services to widen the A6 motorway, aiming for the motorway to be energy neutral after construction. RWS developed instruments to calculate the CO 2 emissions, then selected a tender using a combination of price and quality according to the economically most advantageous submission. This was the Procura+ Award winning tender in 2016 for Tender Procedure of the Year.

CATALAN GOVERNMENT

Improving the air in Catalonia through clean vehicle procurement

The Catalan Government has multi-pronged approach to encouraging SPP of vehicles, including: provision of Green Vehicle Procurement Guide, development of specific government agreements to encourage procurement of low emission vehicles, supporting the Catalan Ecolabel, and promoting sustainable mobility. Aligning policies across governmental levels sends clear signal to the market, which is able and ready to deliver more sustainable options.

METROPOLITAN CITY OF ROME CAPITAL

Developing a monitoring system for GPP

The Metropolitan City of Rome Capital has been monitoring GPP since 2009, and in 2016, it introduced a new monitoring system linked to the public procurement electronic information system. This innovative, digital system makes it possible to require departments to attach relevant environmental criteria to procurement procedures.  

CORNWALL COUNCIL

Creating guidance and templates for market engagement

In 2016 Cornwall Council launched a project which focused on improving knowledge of and confidence around using market engagement techniques throughout the commissioning and procurement cycle. As a result, procurers and suppliers alike have been supported to participate in engagement, and activities are better targeted and more proportionate to the potential value to be gained.  

CITY OF BARCELONA

+Sustainable City Council Programme

Barcelona City Council has been implementing SPP for almost two decades, and in 2006 it launched the +SCC programme which introduced firm purchasing commitments which are applicable to all council departments. Participatory processes have been central to the development of the +SCC Programme, and were used to develop strategic goals and define compulsory criteria for 12 high priority procurement categories.

NANTES METROPOLITAN AREA

Promoting responsible purchasing through policy

Nantes Metropolitan Area has been implementing Responsible Public Procurement (RPP) since 2001, and in 2017 it initiated the Responsible Purchasing Promotion Scheme (SPAR) to guide further action across a range of areas, including the Circular Economy, energy transition, environmental pollution and organic food. The result is a framework of feasible, measurable actions, which are monitored and adjusted as required.

GOVERNMENT OF FLANDERS

Monitoring progress towards SPP in Flanders

The Government of Flanders has a target to achieve 100% sustainable public procurement by 2020. In order to track its progress towards this target, the Environment, Nature & Energy Department has developed a system for monitoring SPP, which it has integrated into existing accounting systems. Data can now be collected easily, in a format which generates useful, comparable results, and which can be used to guide future improvements.

MINISTRY OF DEFENCE, NETHERLANDS

Procurement of textiles from recycled fibres

In its procurement of towels and overalls, the Ministry of Defence of the Kingdom of the Netherlands (MODNL) followed a circular policy and explored requirements around recycled fibres. The winning bids creating estimated savings of 233,000,000 litres of water, 69,000 kg CO2 and 23 MJ of energy. This was the Procura+ Award winning tender in 2017 for Innovation Procurement of the Year.

PUBLIC HEALTH WALES

Reuse and remanufacture of office furnishings

When Public Health Wales (PHW) moved offices in 2016, it wanted the successful bidder to use as much of its existing office equipment, furniture and flooring as possible, as well as supplying remanufactured goods from other sources. The winning consortium of social enterprises supplied over 2,500 items, with only 6% from new stock. The circular approach diverted 41 tonnes of waste from landfill with a CO2 saving of 134 tonnes.  This was the Procura+ Award winning tender in 2017 for Tender Procedure of the Year.

INSTITUTE FOR SAFETY, NETHERLANDS

Sustainable textiles for the fire service

The Institute for Safety worked with 19 fire service regions in the Netherlands to engage suppliers and encourage sustainable solutions to their textile needs. By purchasing clothing made from organic cotton and polyester from recycled fibres , they saved 134 tonnes of CO 2 and prevented 262 tonnes of toxic additives and pesticides in one year alone of a 6-8 year contract.  This was the Procura+ Award 2017 runner-up in the category Sustainable Procurement of the Year.

Encouraging sustainable choices through an office supply framework

Flanders has set a target that at least 50% of products purchased in its latest office supply framework are sustainable.To achieve this, it used a mix of technical specifications and award criteria to encourage the inclusion of sustainable stationery products in the product inventory. In addition, it used contract performance clauses to ensure that the contractor works with users of the framework to ensure that the amount of sustainable products they are choosing is increasing over the lifetime of the contract.

HYVINKÄÄ MUNICIPALITY

Procuring the first Nordic Swan ecolabelled pre-school in Finland

In 2015, Hyvinkää Municipality set an ambition to procure the first ecolabelled pre-school in Finland. By building a pre-school to the standards necessary to achieve the Nordic Swan Ecolabel, Hyvinkää was able to promote a range of sustainability considerations, including promoting energy use and using sustainable building materials and methods. The winning bidder not only built the school, but also managed the ecolabel verification process, which the school successfully achieved in August 2017. This was the Procura+ Award winning tender in 2017 for Sustainable Procurement of the Year.

Working with suppliers to achieve social opportunities

Since 2009, TfL has worked in partnership with suppliers to provide opportunities to people from a range of backgrounds, while also ensuring the deliverability of its future business plan. This approach has been reinforced by the Greater London Authority's Responsible Procurement Policy (2017). By inserting Stategic Labour Needs and Training (SLNT) into contracts, and working with other third sector organisations, TfL has successfully increased the routes into supply chain employment, helping to create 5,400 supply chain apprenticeship starts and over 5,000 workless job starts.

Procuring energy saving building technologies for residential buildings

ATC Torino is a public agency which provides social housing, and since 1996, ATC has been improving the environmental and energy performance of its properties with the dual benefit of decreasing energy costs and increasing the comfort of its homes for residents. In conjunction with the PAPIRUS project, ATC conducted a PPI process to procure technical solutions which improve energy performance.  The contract was awarded on the basis of the most economically advantageous tender, weighted according to energy efficiency, sustainability, installation and maintenance and economic criteria.

Vienna Ombuds Office for Environmental Protection

The Viennese Database for Disinfectants (WIDES)

In order to help procurers to identify disinfectants with low impact on health and environment, the City of Vienna set up the Viennese Database for Disinfectants (WIDES) . WIDES ranks and scores products across a number of hazard categories, and all departments are required to use it for purchasing. It significantly contributes to transparency on the disinfectant market, and its impact is reflected in rising purchases of disinfectants with low risk potential, and influencing producers to use low impact ingredients.

How to Solve a Supply Chain Case Study Interview

• Last Updated January, 2022

Former Accenture

People can be nervous about approaching a supply chain case study interview.

Everyone has some level of experience with marketing and sales because they see these functions in stores and advertisements every day.

The supply chain that gets the product on a store shelf (whether it’s a physical one or digital) can be more opaque.

Supply chain management is the optimization of the process of designing and creating a good or service and getting it to the customer in the most efficient way possible.

Breaking the supply chain down into its component steps will allow you to look at essential parts of the process and uncover which steps may have problems that need to be addressed to better meet customer needs.

In this article, we’ll discuss:

• The types of business problems that fall under supply chain management,
• Why supply chain matters,
• Key factors to consider in a supply chain case,
• A supply chain case example, and
• Our 7 tips on answering a supply chain case interview question.

Let’s get started!

What Types of Business Problems Fall into Supply Chain Management?

Supply chain management includes:

• Product development, 
• Sourcing parts and materials, 
• Production, 
• Logistics, and
• Information systems that support this process.

Each consulting firm breaks down the group of consultants who work on supply chain problems differently. Some firms put the entire process under supply chain. 

In others, “production” problems are managed by an operations practice or service line. The supply chain practice is responsible for issues like:

• How does a company get the necessary components that go into making its product in a cost-effective and timely fashion?
• And how does the company deliver that product to the end-customer efficiently and at the required service level?

For example, before a company can manufacture a bike, it needs tires, steel, or aluminum for the frame, the bike chain, etc. To get the finished bike to market, they need transportation to retail stores or a chain’s distribution warehouse. 

For the purpose of this article, we’ll look at the broader definition of supply chain, the entire process from getting components parts, to manufacturing the product and delivering finished goods as cheaply and efficiently as possible while meeting or exceeding service level expectations.

Nail the case & fit interview with strategies from former MBB Interviewers that have helped 89.6% of our clients pass the case interview.

Why Does the Movement of Goods To & From a Factory Matter So Much?

Moving goods to and from a factory might not seem to be the most exciting thing in the world but it’s fundamental to business success. If you can’t get your innovative new product to market so your customers can buy it, it can’t add value to your bottom line. 

From a financial perspective, there are both inbound and outbound considerations. 

Inbound considerations include:

• Transportation costs from supplier to factory/warehouse
• Warehousing cost 
• Carrying cost of inventory

Outbound considerations include:

• Transportation costs from factory to customer or store

Let’s look at these in more detail.

Transportation Cost

Transportation costs include both receiving goods from suppliers and distributing them to the customer. There are several factors to be considered when calculating transportation costs, and they may have to be weighed against other factors.

For example, is it more beneficial to use a cheaper supplier that has higher inbound transportation costs? Is it better to use a more expensive carrier service that results in a lower rate of damaged goods or quicker transit time?

Warehousing Cost

The cost of storing inventory, whether component parts or finished products, needs to be considered in effective supply chain management. Warehousing costs can be significant and can be optimized in a number of ways:

• Only renting the storage space you need and using it efficiently.
• Optimizing product packaging to reduce the storage space required.
• Researching less expensive potential warehousing locations.
• Using a multi-client facility where several businesses share the cost (if not a lot of space is required.)

It’s worth bearing in mind that, like many things in supply chain management, there may be tradeoffs. Cheaper warehousing that’s poorly connected to a company’s distribution network could end up costing you more time and money than more expensive storage that’s well connected. It’s important to optimize total supply chain costs, not each individual cost in the supply chain.

Inventory Carrying Cost

In addition to storage costs, there are several other costs associated with holding inventory. These include:

• Capital cost . Money that’s been invested in inventory cannot be used elsewhere.
• Insurance . Storing inventory requires insurance to cover the risk of theft or damage.
• Risk . Products may decrease in value or become obsolete during the time they’re stored.

Similarly, from a customer service level perspective, there are both inbound and outbound considerations.

• Factory/production cell downtime due to lack of component parts. 
• Missed sales due to stockout at retail stores.
• Failure to meet customer service-level expectations.

In short, inventory levels are about managing supply vs. demand. If there is a problem with inbound supply, production will slow or cease. This is highly inefficient and reduces potential product profitability. 

For example, the blockage of the Suez Canal in early 2021 due to a container ship that ran aground was expected to delay shipment of $9.6 billion in goods a day on the 150+ vessels waiting to travel through the canal according to a BBC article. These delays are expected to cost companies substantial sums due to:

• Lost sales as customers look to competitors to purchase out-of-stock goods,
• Production downtime at manufacturers resulting from parts shortages,
• Higher shipping costs on ships detoured to longer, more expensive sea routes to avoid the canal, and 
• Higher shipping costs due to a worldwide shortage of shipping containers that was exacerbated by this accident.

Key Factors to Consider in a Supply Chain Case Study Interview

A supply chain process map.

When analyzing a supply chain case, the best place to start is by mapping out the steps parts go through as they come into the factory, go through the manufacturing and quality control processes, and then are finally shipped to the customer. A process map like the one above will help you identify key steps.

Imagine yourself walking the production floor following the process the parts and end-product go through. In a supply chain case with an actual client, you’ll do this.

An effective supply chain moves the various elements seamlessly in the most efficient manner, minimizing waste and maximizing profitability. The flow of information between supplier and buyer, production, and the market should also move freely. This means it can be used to improve supply chain decisions. For example, an increase in orders at Manufacturer A will be communicated to their supplier, Company B, so that they know that they expect a larger than normal parts order and are prepared to fulfill it.

Imagine How Raw Materials Arrive at a Factory and Move Through It

• What steps are required to get parts into inventory?
• Where are they stored?
• How are they moved around the factory?
• How are they changed to outputs – single step or multiple?
• Is there an assembly step? A quality control step?
• How are they packaged and stored?
• Where and how are they prepared and loaded for delivery to market?

Tip! Look for steps in the process where inventory is piling up. This may be because parts supply or production is unbalanced, reducing efficiency. Find ways to improve these bottlenecks.

Tip! Look for areas where there are significant problems with quality control. Parts or products that need to be sent back to suppliers or go through production rework are opportunities to improve efficiency and quality and, by doing so, save money.

After you have a clear understanding of the company’s supply chain, there are 4 factors you’ll want to dive deeper into to find opportunities to improve efficiency:

• Operational considerations,
• Financial considerations,
• Service levels, and 
• Matching supply and demand.

Operational Considerations

The best supply chains are highly efficient, which means they have low to minimal waste and consistently operate at optimum levels. This means that labor capacity is well-matched to production requirements.

They are also reliable with robust supplier relationships and an effective transportation solution.

Questions to Ask about Operational Efficiency

• Product development
• How well do we understand customer needs and use that insight to develop next-generation products?
• How efficient are we at designing new products to meet these customer needs?
• Is there a good split of engineering resources allocated to incremental product improvements versus next-generation product design?
• Do we regularly review contracts for cost-savings opportunities (both for direct spend on components that go into our end-products and indirect spend on things such as travel and office supplies)?
• Do we optimize total cost of ownership rather than individual component costs?
• Is the production process optimized or does work-in-process accumulate behind bottlenecked resources (equipment or employees)?
• Does the factory experience production shut-downs due to a lack of raw materials?
• Does the factory experience unexpected equipment downtime?
• Are employees cross-trained to minimize rework?
• How efficient is the inbound transportation network? Are raw materials received on a just-in-time basis? How often are there stock-outs?
• How efficient is the outbound transportation network? Are end products received by customers on time? 
• Are there product defects or quality issues caused by transport?
• Information systems that support this process
• Do information systems support the exchange of data up and down the supply chain to optimize decision-making?

Financial Considerations

There are both fixed and variable costs associated with getting a product to market that should be considered.

Fixed Production Costs

Fixed costs are costs that are independent of production volume (at least over the short term) — for example, factory leasing costs.

Let’s assume a factory can produce a maximum of 10,000 units of a product a year. To lease the factory is the same price whether you produce 1 unit or 10,000 units a year. 

Fixed costs can depend on production volume only when it exceeds a threshold volume.

For example, if sales increase and the business needed to produce 15,000 units a year, the company would need to lease another factory to deal with the increased production. In this case, volume does affect a fixed cost.

Fixed costs do directly influence the cost per unit, however. The higher the utilization of the fixed production volume, the lower the cost per unit. 

For example, if the factory mentioned above costs $10,000 to lease and the factory is producing at its full capacity of 10,000 units, then the fixed cost/unit of output is $1. If the factory is only running at 50% capacity, the fixed costs/unit of output would double to $2.

Variable Production Costs

Variable costs change in proportion to production volume. For every additional unit produced, an additional $x of variable cost is incurred. Examples of variable cost items include raw materials and hourly labor costs.

There are times when rebalancing fixed and variable costs can be an opportunity for savings. For example, is it beneficial to invest in machinery or automation (fixed cost) if it reduces high labor costs? Be sure to look for opportunities like this as well as optimizing fixed and variable costs on their own.

Questions To Ask About Financial Optimization

• How do increases and decreases in production impact fixed and variable costs?
• Are there variable costs that fixed costs could replace?  (Example: new machinery that could reduce labor costs as well as total costs of production?)
• Are there fixed costs that could be reduced through outsourcing? (Example: costs of leasing and managing a warehouse that could be reduced by outsourcing?)
• Where are the biggest opportunities for financial savings?
• How could reducing or increasing costs affect other considerations such as operational efficiency?

Service Levels

In supply chain management, the term service level has a specific meaning. It relates to how well inventory levels fulfill customer orders. A good service level is one that can fulfill customer orders without incurring a delay.

This is important because customer loyalty may decrease if products are consistently out of stock.

Questions To Ask About Service Levels

• What are the clients’ service level expectations?
• How often are customer orders fulfilled successfully?
• How would changing service levels affect buyer behavior or customer retention?
• How would changing service levels increase or decrease costs?

Supply and Demand

Effective supply chain management is about ensuring demand for the product is equaled by supply, at the lowest cost to the business.

If demand is higher than supply, customers could turn to a competitor.

If supply is higher than demand, inventory costs can reduce profit margins. Storing inventory also increases business risk as the product may decrease in value or become obsolete as it waits to reach the market.

Questions To Ask About Supply And Demand

• What factors influence supply?
• What factors influence demand?
• How good is the organization at forecasting demand?
• How flexible is the organization at changing output (e.g., are workers cross-trained for different production cells?)
• How well are supply and demand currently balanced?
• If they are imbalanced, what factors are contributing to this and how can those issues be fixed?

Supply Chain Case Study Interview – A Sample Question

Problem: Intel is the world’s largest manufacturer of computer chips. In 2008, Intel launched its low-cost “Atom” chip . The supply chain costs of Intel’s chips were about $5.50 a chip, which were acceptable for chips that sold for $100 each. For the Atom chips, priced at $20, these costs were too high to generate a profit.

What factors should Intel consider in order to reduce its supply chain costs, and what actions would you recommend as a priority?

Mapping the Supply Chain

Mapping out the supply chain process for Intel’s Atom chip identified several steps that had already been optimized including:

• Raw material costs, 
• Packaging costs, and
• Duty payments.

It also identified that customers required a 2-week service level for receiving orders after a purchase order was submitted. 

However, the order cycle for the Atom chip was 9 weeks. Order-cycle time is the time between when a customer order is received and when the goods are shipped. High levels of inventory were required to ensure that customer service levels could be met despite the long production cycle time.

Because of this, production time/inventory was identified as the key step that had opportunities for improvement.

Identifying Opportunities to Reduce Production Time and Inventory

The process for reducing inventory required reducing the order cycle time to meet the customer’s 2-week required service level. Getting to a 2-week cycle time from a 9-week cycle time was a considerable challenge. To meet this challenge, opportunities to improve order cycle time were addressed throughout the supply chain process. 

As described above, for a supply chain case, there are 4 main factors to consider:

• Service levels, and
• Supply and demand.

In drilling down on this case, the following opportunities were identified:

• Financial: Intel moved to a vendor-managed inventory model where possible to save inventory carrying costs. Vendor-managed inventory is the process of having a parts manufacturer take responsibility for holding the required amount of inventory at the customer location.  
• Operational: The team was able to identify multiple production process improvements to reduce order cycle time, such as cutting the chip assembly test from 5 days to 2 days.
• Service levels : As mentioned, the 2-week required service level was not flexible, providing no opportunities in this area.
• Balancing supply and demand: Intel introduced a formal sales and operation planning process to provide better demand forecasts and time production to better meet demand.

Our 7 Tips on Answering a Supply Chain Case Interview Question

Tip 1: walk through the supply chain process.

Start by mapping out the step-by-step supply chain process.

Understanding how materials arrive from suppliers, the steps to turn them into outputs, and what’s needed to get them to market is an important first step. Once you’ve done this, look for bottlenecks or inefficiencies in the system.

Tip 2: Clarify Your Understanding of the Case 

At the start of any case study, it’s important to make sure you understand the question. This includes any information you’ve received about the case and also what you think you need to do to solve it.

A simple way to do this is to repeat back to the interviewer what you know about the case and what you believe the task to be. This gives them an early opportunity to guide your thinking if you look to be going off track.

Tip 3: Ask Questions

If you don’t understand anything, ask! Even if you feel you should know something, there’s no point wasting time worrying about it. Just ask the question and move on.

Similarly, if there are gaps in the data provided, or you need more information in order to form a hypothesis or conclusion, ask your interviewer for more detail. They may provide further information that helps you choose an approach or strengthens your analysis.

Tip 4: Take Time to Structure your Thinking

Don’t be afraid to take your time when structuring your approach to the case. 

Moments of silence can feel endless in an interview situation, but it’s better to use some extra thinking time and respond clearly and logically than answer immediately in a rushed or haphazard manner.

If you need more time to think, it’s perfectly ok to signpost that to your interviewer by asking for a little more time to organize your thoughts.

Tip 5: Use A Framework

Frameworks are popular with both candidates and interviewers alike as they bring structure to your analysis. 

Case interviews can be daunting, and anxiety can make it tricky to think things through logically. Using a framework provides an anchor to organize your thoughts around and makes it less likely you’ll leave anything out.

In supply chain cases, the supply chain process itself can often be used as your framework.

Tip 6: Share Your Analysis

Speaking of analysis, don’t be afraid to share your thoughts aloud. A case interview should be more of a conversation than an interrogation!

Remember your math teacher always telling you to show your work? The same is true in case interviews.

Explaining your thought process helps the interviewer see how you process and make connections between pieces of information. They may also point out small mistakes in your arithmetic so that they don’t mess up your conclusion.

Tip 7: Provide a Recommendation

At the end of the interview, briefly summarize the information you’ve uncovered about the case and how it’s influenced your thinking. Then clearly state your recommendation for the client’s next steps.

Make sure you also share any other important details, such as any risks associated with your recommendation and how they might be overcome.

In this article, we’ve covered:

• Which business problems supply chain management covers,
• The reasons supply chain management is important,
• The essential considerations of a supply chain case,
• An example of a supply chain case, and
• Our top 7 tips for acing the supply chain case interview.

Still have questions?

If you have more questions about supply chain case study interview questions, leave them in the comments below. One of My Consulting Offer’s case coaches will answer them. Other people prepping for supply chain case interviews found the following pages helpful:

• Our Complete Guide to Case Interview Prep ,
• Case Interview Types , and
• Case Interview Examples .

Help with Consulting Interview Prep

Thanks for turning to My Consulting Offer for advice on supply chain case study interview questions. My Consulting Offer has helped almost 85% of the people we’ve worked with to get a job in management consulting. We want you to be successful in your consulting interviews too. For example, here is how Tanya was able to get her offer from McKinsey.

4 thoughts on “How to Solve a Supply Chain Case Study Interview”

I need to do a power point for an interview. I have to do a Logistics Analyst Case Study answering questions regarding delivery data for the supply chain and I can’t seem to figure out how to go about answering the questions. I need some professional guidance to help me through the process. Thank you.

Supply chain cases are challenging.

If you’d like an overview of how to approach answering a consulting case interview, our Ultimate Guide to Case Interview Prep is your best source. If you’d like a one-on-one coach for case interviews, including learning how to case in as short as a week, you can apply here .

I would like some more information on supply chain cases – interview’s specifically but not only

Hey, Michael,

Here are a couple publically available cases that might help you: Steel Co. from the NYU Stern 2019 casebook. https://drive.google.com/drive/folders/1AImB14ysaUoYBNw-ArtoCtzZA5cADUhy S.A. Shipping from the McCombs Texas MBA Casebook 2017-2018.

Best of luck on your supply chain case prep!

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A meta-analysis on global change drivers and the risk of infectious disease

• Michael B. Mahon   ORCID: orcid.org/0000-0002-9436-2998 1 , 2   na1 ,
• Alexandra Sack 1 , 3   na1 ,
• O. Alejandro Aleuy 1 ,
• Carly Barbera 1 ,
• Ethan Brown   ORCID: orcid.org/0000-0003-0827-4906 1 ,
• Heather Buelow   ORCID: orcid.org/0000-0003-3535-4151 1 ,
• David J. Civitello 4 ,
• Jeremy M. Cohen   ORCID: orcid.org/0000-0001-9611-9150 5 ,
• Luz A. de Wit   ORCID: orcid.org/0000-0002-3045-4017 1 ,
• Meghan Forstchen 1 , 3 ,
• Fletcher W. Halliday 6 ,
• Patrick Heffernan 1 ,
• Sarah A. Knutie 7 ,
• Alexis Korotasz 1 ,
• Joanna G. Larson   ORCID: orcid.org/0000-0002-1401-7837 1 ,
• Samantha L. Rumschlag   ORCID: orcid.org/0000-0003-3125-8402 1 , 2 ,
• Emily Selland   ORCID: orcid.org/0000-0002-4527-297X 1 , 3 ,
• Alexander Shepack 1 ,
• Nitin Vincent   ORCID: orcid.org/0000-0002-8593-1116 1 &
• Jason R. Rohr   ORCID: orcid.org/0000-0001-8285-4912 1 , 2 , 3   na1  

Nature ( 2024 ) Cite this article

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• Infectious diseases

Anthropogenic change is contributing to the rise in emerging infectious diseases, which are significantly correlated with socioeconomic, environmental and ecological factors 1 . Studies have shown that infectious disease risk is modified by changes to biodiversity 2 , 3 , 4 , 5 , 6 , climate change 7 , 8 , 9 , 10 , 11 , chemical pollution 12 , 13 , 14 , landscape transformations 15 , 16 , 17 , 18 , 19 , 20 and species introductions 21 . However, it remains unclear which global change drivers most increase disease and under what contexts. Here we amassed a dataset from the literature that contains 2,938 observations of infectious disease responses to global change drivers across 1,497 host–parasite combinations, including plant, animal and human hosts. We found that biodiversity loss, chemical pollution, climate change and introduced species are associated with increases in disease-related end points or harm, whereas urbanization is associated with decreases in disease end points. Natural biodiversity gradients, deforestation and forest fragmentation are comparatively unimportant or idiosyncratic as drivers of disease. Overall, these results are consistent across human and non-human diseases. Nevertheless, context-dependent effects of the global change drivers on disease were found to be common. The findings uncovered by this meta-analysis should help target disease management and surveillance efforts towards global change drivers that increase disease. Specifically, reducing greenhouse gas emissions, managing ecosystem health, and preventing biological invasions and biodiversity loss could help to reduce the burden of plant, animal and human diseases, especially when coupled with improvements to social and economic determinants of health.

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Towards common ground in the biodiversity–disease debate

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Code availability

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Acknowledgements

We thank C. Mitchell for contributing data on enemy release; L. Albert and B. Shayhorn for assisting with data collection; J. Gurevitch, M. Lajeunesse and G. Stewart for providing comments on an earlier version of this manuscript; and C. Carlson and two anonymous reviewers for improving this paper. This research was supported by grants from the National Science Foundation (DEB-2109293, DEB-2017785, DEB-1518681, IOS-1754868), National Institutes of Health (R01TW010286) and US Department of Agriculture (2021-38420-34065) to J.R.R.; a US Geological Survey Powell grant to J.R.R. and S.L.R.; University of Connecticut Start-up funds to S.A.K.; grants from the National Science Foundation (IOS-1755002) and National Institutes of Health (R01 AI150774) to D.J.C.; and an Ambizione grant (PZ00P3_202027) from the Swiss National Science Foundation to F.W.H. The funders had no role in study design, data collection and analysis, decision to publish or preparation of the manuscript.

Author information

These authors contributed equally: Michael B. Mahon, Alexandra Sack, Jason R. Rohr

Authors and Affiliations

Department of Biological Sciences, University of Notre Dame, Notre Dame, IN, USA

Michael B. Mahon, Alexandra Sack, O. Alejandro Aleuy, Carly Barbera, Ethan Brown, Heather Buelow, Luz A. de Wit, Meghan Forstchen, Patrick Heffernan, Alexis Korotasz, Joanna G. Larson, Samantha L. Rumschlag, Emily Selland, Alexander Shepack, Nitin Vincent & Jason R. Rohr

Environmental Change Initiative, University of Notre Dame, Notre Dame, IN, USA

Michael B. Mahon, Samantha L. Rumschlag & Jason R. Rohr

Eck Institute of Global Health, University of Notre Dame, Notre Dame, IN, USA

Alexandra Sack, Meghan Forstchen, Emily Selland & Jason R. Rohr

Department of Biology, Emory University, Atlanta, GA, USA

David J. Civitello

Department of Ecology and Evolutionary Biology, Yale University, New Haven, CT, USA

Jeremy M. Cohen

Department of Botany and Plant Pathology, Oregon State University, Corvallis, OR, USA

Fletcher W. Halliday

Department of Ecology and Evolutionary Biology, Institute for Systems Genomics, University of Connecticut, Storrs, CT, USA

Sarah A. Knutie

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Contributions

J.R.R. conceptualized the study. All of the authors contributed to the methodology. All of the authors contributed to investigation. Visualization was performed by M.B.M. The initial study list and related information were compiled by D.J.C., J.M.C., F.W.H., S.A.K., S.L.R. and J.R.R. Data extraction was performed by M.B.M., A.S., O.A.A., C.B., E.B., H.B., L.A.d.W., M.F., P.H., A.K., J.G.L., E.S., A.S. and N.V. Data were checked for accuracy by M.B.M. and A.S. Analyses were performed by M.B.M. and J.R.R. Funding was acquired by D.J.C., J.R.R., S.A.K. and S.L.R. Project administration was done by J.R.R. J.R.R. supervised the study. J.R.R. and M.B.M. wrote the original draft. All of the authors reviewed and edited the manuscript. J.R.R. and M.B.M. responded to reviewers.

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Correspondence to Jason R. Rohr .

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Extended data figures and tables

Extended data fig. 1 prisma flowchart..

The PRISMA flow diagram of the search and selection of studies included in this meta-analysis. Note that 77 studies came from the Halliday et al. 3 database on biodiversity change.

Extended Data Fig. 2 Summary of the number of studies (A-F) and parasite taxa (G-L) in the infectious disease database across ecological contexts.

The contexts are global change driver ( A , G ), parasite taxa ( B , H ), host taxa ( C , I ), experimental venue ( D , J ), study habitat ( E , K ), and human parasite status ( F , L ).

Extended Data Fig. 3 Summary of the number of effect sizes (A-I), studies (J-R), and parasite taxa (S-a) in the infectious disease database for various parasite and host contexts.

Shown are parasite type ( A , J , S ), host thermy ( B , K , T ), vector status ( C , L , U ), vector-borne status ( D , M , V ), parasite transmission ( E , N , W ), free living stages ( F , O , X ), host (e.g. disease, host growth, host survival) or parasite (e.g. parasite abundance, prevalence, fecundity) endpoint ( G , P , Y ), micro- vs macroparasite ( H , Q , Z ), and zoonotic status ( I , R , a ).

Extended Data Fig. 4 The effects of global change drivers and subsequent subcategories on disease responses with Log Response Ratio instead of Hedge’s g.

Here, Log Response Ratio shows similar trends to that of Hedge’s g presented in the main text. The displayed points represent the mean predicted values (with 95% confidence intervals) from a meta-analytical model with separate random intercepts for study. Points that do not share letters are significantly different from one another (p < 0.05) based on a two-sided Tukey’s posthoc multiple comparison test with adjustment for multiple comparisons. See Table S 3 for pairwise comparison results. Effects of the five common global change drivers ( A ) have the same directionality, similar magnitude, and significance as those presented in Fig. 2 . Global change driver effects are significant when confidence intervals do not overlap with zero and explicitly tested with two-tailed t-test (indicated by asterisks; t 80.62  = 2.16, p = 0.034 for CP; t 71.42  = 2.10, p = 0.039 for CC; t 131.79  = −3.52, p < 0.001 for HLC; t 61.9  = 2.10, p = 0.040 for IS). The subcategories ( B ) also show similar patterns as those presented in Fig. 3 . Subcategories are significant when confidence intervals do not overlap with zero and were explicitly tested with two-tailed one sample t-test (t 30.52  = 2.17, p = 0.038 for CO 2 ; t 40.03  = 4.64, p < 0.001 for Enemy Release; t 47.45  = 2.18, p = 0.034 for Mean Temperature; t 110.81  = −4.05, p < 0.001 for Urbanization); all other subcategories have p > 0.20. Note that effect size and study numbers are lower here than in Figs. 3 and 4 , because log response ratios cannot be calculated for studies that provide coefficients (e.g., odds ratio) rather than raw data; as such, all observations within BC did not have associated RR values. Despite strong differences in sample size, patterns are consistent across effect sizes, and therefore, we can be confident that the results presented in the main text are not biased because of effect size selection.

Extended Data Fig. 5 Average standard errors of the effect sizes (A) and sample sizes per effect size (B) for each of the five global change drivers.

The displayed points represent the mean predicted values (with 95% confidence intervals) from the generalized linear mixed effects models with separate random intercepts for study (Gaussian distribution for standard error model, A ; Poisson distribution for sample size model, B ). Points that do not share letters are significantly different from one another (p < 0.05) based on a two-sided Tukey’s posthoc multiple comparison test with adjustment for multiple comparisons. Sample sizes (number of studies, n, and effect sizes, k) for each driver are as follows: n = 77, k = 392 for BC; n = 124, k = 364 for CP; n = 202, k = 380 for CC; n = 517, k = 1449 for HLC; n = 96, k = 355 for IS.

Extended Data Fig. 6 Forest plots of effect sizes, associated variances, and relative weights (A), Funnel plots (B), and Egger’s Test plots (C) for each of the five global change drivers and leave-one-out publication bias analyses (D).

In panel A , points are the individual effect sizes (Hedge’s G), error bars are standard errors of the effect size, and size of the points is the relative weight of the observation in the model, with larger points representing observations with higher weight in the model. Sample sizes are provided for each effect size in the meta-analytic database. Effect sizes were plotted in a random order. Egger’s tests indicated significant asymmetries (p < 0.05) in Biodiversity Change (worst asymmetry – likely not bias, just real effect of positive relationship between diversity and disease), Climate Change – (weak asymmetry, again likely not bias, climate change generally increases disease), and Introduced Species (relatively weak asymmetry – unclear whether this is a bias, may be driven by some outliers). No significant asymmetries (p > 0.05) were found in Chemical Pollution and Habitat Loss/Change, suggesting negligible publication bias in reported disease responses across these global change drivers ( B , C ). Egger’s test included publication year as moderator but found no significant relationship between Hedge’s g and publication year (p > 0.05) implying no temporal bias in effect size magnitude or direction. In panel D , the horizontal red lines denote the grand mean and SE of Hedge’s g and (g = 0.1009, SE = 0.0338). Grey points and error bars indicate the Hedge’s g and SEs, respectively, using the leave-one-out method (grand mean is recalculated after a given study is removed from dataset). While the removal of certain studies resulted in values that differed from the grand mean, all estimated Hedge’s g values fell well within the standard error of the grand mean. This sensitivity analysis indicates that our results were robust to the iterative exclusion of individual studies.

Extended Data Fig. 7 The effects of habitat loss/change on disease depend on parasite taxa and land use conversion contexts.

A) Enemy type influences the magnitude of the effect of urbanization on disease: helminths, protists, and arthropods were all negatively associated with urbanization, whereas viruses were non-significantly positively associated with urbanization. B) Reference (control) land use type influences the magnitude of the effect of urbanization on disease: disease was reduced in urban settings compared to rural and peri-urban settings, whereas there were no differences in disease along urbanization gradients or between urban and natural settings. C) The effect of forest fragmentation depends on whether a large/continuous habitat patch is compared to a small patch or whether disease it is measured along an increasing fragmentation gradient (Z = −2.828, p = 0.005). Conversely, the effect of deforestation on disease does not depend on whether the habitat has been destroyed and allowed to regrow (e.g., clearcutting, second growth forests, etc.) or whether it has been replaced with agriculture (e.g., row crop, agroforestry, livestock grazing; Z = 1.809, p = 0.0705). The displayed points represent the mean predicted values (with 95% confidence intervals) from a metafor model where the response variable was a Hedge’s g (representing the effect on an infectious disease endpoint relative to control), study was treated as a random effect, and the independent variables included enemy type (A), reference land use type (B), or land use conversion type (C). Data for (A) and (B) were only those studies that were within the “urbanization” subcategory; data for (C) were only those studies that were within the “deforestation” and “forest fragmentation” subcategories. Sample sizes (number of studies, n, and effect sizes, k) in (A) for each enemy are n = 48, k = 98 for Virus; n = 193, k = 343 for Protist; n = 159, k = 490 for Helminth; n = 10, k = 24 for Fungi; n = 103, k = 223 for Bacteria; and n = 30, k = 73 for Arthropod. Sample sizes in (B) for each reference land use type are n = 391, k = 1073 for Rural; n = 29, k = 74 for Peri-urban; n = 33, k = 83 for Natural; and n = 24, k = 58 for Urban Gradient. Sample sizes in (C) for each land use conversion type are n = 7, k = 47 for Continuous Gradient; n = 16, k = 44 for High/Low Fragmentation; n = 11, k = 27 for Clearcut/Regrowth; and n = 21, k = 43 for Agriculture.

Extended Data Fig. 8 The effects of common global change drivers on mean infectious disease responses in the literature depends on whether the endpoint is the host or parasite; whether the parasite is a vector, is vector-borne, has a complex or direct life cycle, or is a macroparasite; whether the host is an ectotherm or endotherm; or the venue and habitat in which the study was conducted.

A ) Parasite endpoints. B ) Vector-borne status. C ) Parasite transmission route. D ) Parasite size. E ) Venue. F ) Habitat. G ) Host thermy. H ) Parasite type (ecto- or endoparasite). See Table S 2 for number of studies and effect sizes across ecological contexts and global change drivers. See Table S 3 for pairwise comparison results. The displayed points represent the mean predicted values (with 95% confidence intervals) from a metafor model where the response variable was a Hedge’s g (representing the effect on an infectious disease endpoint relative to control), study was treated as a random effect, and the independent variables included the main effects and an interaction between global change driver and the focal independent variable (whether the endpoint measured was a host or parasite, whether the parasite is vector-borne, has a complex or direct life cycle, is a macroparasite, whether the study was conducted in the field or lab, habitat, the host is ectothermic, or the parasite is an ectoparasite).

Extended Data Fig. 9 The effects of five common global change drivers on mean infectious disease responses in the literature only occasionally depend on location, host taxon, and parasite taxon.

A ) Continent in which the field study occurred. Lack of replication in chemical pollution precluded us from including South America, Australia, and Africa in this analysis. B ) Host taxa. C ) Enemy taxa. See Table S 2 for number of studies and effect sizes across ecological contexts and global change drivers. See Table S 3 for pairwise comparison results. The displayed points represent the mean predicted values (with 95% confidence intervals) from a metafor model where the response variable was a Hedge’s g (representing the effect on an infectious disease endpoint relative to control), study was treated as a random effect, and the independent variables included the main effects and an interaction between global change driver and continent, host taxon, and enemy taxon.

Extended Data Fig. 10 The effects of human vs. non-human endpoints for the zoonotic disease subset of database and wild vs. domesticated animal endpoints for the non-human animal subset of database are consistent across global change drivers.

(A) Zoonotic disease responses measured on human hosts responded less positively (closer to zero when positive, further from zero when negative) than those measured on non-human (animal) hosts (Z = 2.306, p = 0.021). Note, IS studies were removed because of missing cells. (B) Disease responses measured on domestic animal hosts responded less positively (closer to zero when positive, further from zero when negative) than those measured on wild animal hosts (Z = 2.636, p = 0.008). These results were consistent across global change drivers (i.e., no significant interaction between endpoint and global change driver). As many of the global change drivers increase zoonotic parasites in non-human animals and all parasites in wild animals, this may suggest that anthropogenic change might increase the occurrence of parasite spillover from animals to humans and thus also pandemic risk. The displayed points represent the mean predicted values (with 95% confidence intervals) from a metafor model where the response variable was a Hedge’s g (representing the effect on an infectious disease endpoint relative to control), study was treated as a random effect, and the independent variable of global change driver and human/non-human hosts. Data for (A) were only those diseases that are considered “zoonotic”; data for (B) were only those endpoints that were measured on non-human animals. Sample sizes in (A) for zoonotic disease measured on human endpoints across global change drivers are n = 3, k = 17 for BC; n = 2, k = 6 for CP; n = 25, k = 39 for CC; and n = 175, k = 331 for HLC. Sample sizes in (A) for zoonotic disease measured on non-human endpoints across global change drivers are n = 25, k = 52 for BC; n = 2, k = 3 for CP; n = 18, k = 29 for CC; n = 126, k = 289 for HLC. Sample sizes in (B) for wild animal endpoints across global change drivers are n = 28, k = 69 for BC; n = 21, k = 44 for CP; n = 50, k = 89 for CC; n = 121, k = 360 for HLC; and n = 29, k = 45 for IS. Sample sizes in (B) for domesticated animal endpoints across global change drivers are n = 2, k = 4 for BC; n = 4, k = 11 for CP; n = 7, k = 20 for CC; n = 78, k = 197 for HLC; and n = 1, k = 2 for IS.

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Mahon, M.B., Sack, A., Aleuy, O.A. et al. A meta-analysis on global change drivers and the risk of infectious disease. Nature (2024). https://doi.org/10.1038/s41586-024-07380-6

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