Retail procurement cost optimization: Toys R Us
About the customer:
- Toys "R" Us has been represented in Germany since 1986 - and has playfully become one of the largest toy retailers in the German-speaking world. This is because the idea of a toy department store has been enthusiastically received by parents and children in this country. The business development of Toys "R" Us in Germany has been a great success story since the founding of the German branch in 1986 and the opening of the first specialist store in Koblenz a year later.
- 95 branches in German-speaking countries
Starting point:
The aim of the procurement cost optimization project was to analyse the existing purchasing conditions at Toys "R" Us and to identify potential savings based on comparisons. The project was carried out in Germany, France, Spain, England and Poland to ensure that this was done as comprehensively as possible. Overall, both the merchandise and, in Germany and Poland, the overheads were analyzed, with the merchandise accounting for the largest share due to its volume.
Challenges in the project:
The biggest challenge was to negotiate the large number of suppliers in a timely manner while still taking into account the specifics of each product range in detail and linking them to the history of the respective product range. The local requirements in the countries had to be taken into account and, despite the varying degrees of restructuring and reorganization measures, the respective purchasing departments had to be integrated and become "one team" with the local purchasers. The new European structure led to new areas of responsibility and meant that suppliers increasingly wanted to avoid direct negotiations in order to conduct discussions at a European level. This required a high degree of coordination for the negotiations, while the development of the dollar exchange rate and the high proportion of imported toys also made discussions with suppliers more difficult.
One of the key challenges was to use the existing data structures and establish a homogenized supplier evaluation based on KPIs. In the discussions, these KPI benchmarks were used specifically to point out opportunities that had not yet been exploited.
Target achievement:
The project target was achieved for both overheads and merchandise as a whole. In France, despite the short negotiation period, the targeted savings potential was even exceeded, as was the case in Spain and Poland. In Germany, a precision landing was achieved, while in the UK the last few euros were not enough to reach the target in full. The savings targets for the European project were therefore met and small and medium-sized suppliers in particular, who are not invited every year due to time constraints, were negotiated. The strategy and priorities of Toys "R" Us were also discussed with the suppliers in order to demonstrate the great efforts being made by bricks-and-mortar retailers, particularly in relation to online retailers.
Conclusion:
Despite the large number of suppliers and restructuring in the countries, the ambitious project goal was achieved. Team spirit and intensive coordination between Kloepfel Consulting and the purchasing department were the key to success. The standardized preparation of the key figures provided a transparent and constructive basis for negotiations and paved the way for the success of the project.
Project result
Processed subject areas:
Overheads (e.g. logistics, cleaning, office supplies, hotel costs, cash transportation), complete merchandise from textiles to toys and video games.
Project scorecard
Project volume: around 800 million euros
Project team: 3 consultants or 2 per country
Project duration: 7 months
