Supermarkets Leon: internal costs optimisation to ensure quality and convenience to the consumer

Antonio Papagni funded the Papagni Group in the 60s and started a wholesale food business. When his son Federico joined the company in 1991, the group started to develop in retail, with the opening of their first supermarket. With his solid entrepreneurial spirit and long-term vision, Federico Papagni, current owner and CEO of the Group, was able to develop the company with great passion and professionalism; today the Group is one of the largest regional retail groups in Lazio. The Group now has 8 Léon supermarkets and shopping centres, in addition to a cash and carry, covering the 3 provinces of Rome, Latina and Rieti.

The company is affiliated to the purchasing group Gros. Their mission is to provide quality products through direct selling (bread, delicatessen, fish, etc.) as well as good prices and promotional offers to their clients.

The need to best overcome the obstacles arising from the global economic crisis and the determination to ensure solid growth to all the companies of the group created in 2012, has led management to entrust Expense Reduction Analysts for the optimization and rationalization of different cost categories.

The project, supported and promoted from the outset by Federico Papagni, also involved the Director of Administration for the Group, Mr Marinelli, to identify, along with Alfredo Longo, partner at Expense Reduction Analysts, the most relevant cost categories. Following an in-depth investigation and reporting, the consultants found the best potential for savings in several cost categories: telecommunications, print, electricity, gas, cleaning and banking costs.

The careful selection of suppliers by the Group showed situations where, several times over the years, there had been negotiations with suppliers to reduce prices. Thanks to the company’s very strong focus on cost reduction and the direct intervention of the CEO himself with many suppliers, the Expense Reduction Analysts consultants found straight away that tariffs were already reduced as much as possible. However, the ability of consultants to find alternatives and review processes made it possible to achieve valuable results.

Expense Reduction Analysts’ intervention actually proved to be effective in many cases, not only in the optimization of the tariff plans but also, and above all in the processes review.

In particular, in the case of telephony a meticulous analysis was carried out for active lines and individual rate profiles, for both fixed and mobile, to choose the contractual parameters best fitting individual consumption habits. The results are savings which exceed 25% to date and are still in full consolidation phase.

With regard to the printing of flyers, there was a review of the prices, whilst maintaining a constant level of service, especially for the speed of deliveries. To this day, in addition to achieving cost savings, several theories have been developed that are still being considered, to change the format of flyers and obtain, in the course of the project, even greater savings.

For the energy sector, analysts have submitted a full range of solutions after considering carefully the current tariff plan, placing the customer in the position to assess the best offers for fixed and variable rates, as well as the risks and savings. Savings of 6% have currently been achieved, which are expected to grow during the course of the project.

For the cleaning category, whilst not achieving savings compared to the previous contract, the Papagni Group has nonetheless made good use of the collaboration with Expense Reduction Analysts to select and sign with a new supplier who would guarantee better levels of service, quality and coverage.

For the category of bank costs finally and with in-depth analysis and the use of their own expertise, the Expense Reduction Analysts consultants have identified significant opportunities to review and amend banking conditions.

Thanks to the successes previously achieved, the opportunity for Expense Reduction Analysts to find savings in strategic categories such as transport and packaging is currently underway.

The success of this project lies not only in achieving cost savings, but also in an in-depth and effective review of the processes of procurement.

The monitoring of orders, invoices, and the relevance test with regards to contracts is for the matter one of the main elements of the support provided by Expense Reduction Analyst. The consultants’ intervention was often necessary to spot the errors, such as the non-application of contractual terms agreed by the suppliers.

All along the client benefits in terms of cost savings and also in terms of time savings for their own human resources who can focus on their operational activities. The company does not have a real procurement centre for indirect costs, so that the support provided by Expense Reduction Analysts over the 24 months is crucial, as well as the monitoring activities performed by analysts on several offers from new suppliers. Without a very careful analysis of conditions, the offers of new suppliers can actually very often appear much more attractive than they really are. The analysis conducted by the Expense Reduction Analysts professionals has in some cases prevented the client in resorting to a change of supplier and making the situation worse.

From the beginning the Group has appreciated the formula proposed by Expense Reduction Analysts - no risk and shared savings - and has from the very first analysis recognized the professionalism and great category knowledge shown by individual experts.

A good example is that of the phone industry, which, being highly technical and specialised, requires on-going updating of technological innovations, professionalism and a constant support that the specialists of Expense Reduction Analysts are committed to provide regularly to the client.

CATEGORYSAVINGS
Telephony25%
Energy6%

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