News & Research: Client Successes

Case Study: Supply Chain Outsourcing Support

ScottMadden worked with the management team of an independent nuclear-powered electric generating facility to coordinate detailed due diligence and contract negotiation activities regarding outsourcing its information technology and supply chain functions to a third-party vendor.

• The company had been under pressure from the plant's owner group to improve future financial performance
• Continued improvements in nuclear plant management and related cost reductions industry-wide required them to develop a culture of aggressive and continuous improvement.
• Senior management had established aggressive operational, financial, and staffing targets to assure that the company was among the best run and most cost competitive nuclear generation plants in the United States. As part of this project, management sought to examine if outsourcing certain plant responsibilities would be a potential source of cost savings
• After outsourcing evaluation was completed, the client decided to proceed with outsourcing its supply chain functions and required support in completing its due diligence of the vendor and in developing a viable outsourcing agreement

• Completed an outsourcing evaluation identifying key opportunities
• Finalized outsourcing strategy and identified potential cost savings
• Executed a letter of intent to enter into good faith negotiations between the vendor and company, with a non-binding commitment to reach agreement.
• Developed a due-diligence strategy and plan
• Scheduled and conducted site visits to vendor customers and operating facilities
• Completed a vendor financial review, including review and consideration of any material events, disclosures, litigations, or other pertinent facts
• Facilitated discussions with vendor employees from previous BPO deals to assess their level of satisfaction with previous business conducted with the client
• Compared compensation and benefits practices
• Provided an outsourcing recommendation
• Prepared business schedules for inclusion in the outsourcing agreement and developed a contract negotiation strategy

• Outsourcing evaluation identified 24 of the 47 functions in Phase I (Opportunity Assessment) to be potential outsourcing candidates, either on a stand-alone basis of bundled with other functions
  
• Decided to outsource two business functions (IT and supply chain management) in Phase II (Final Decision and Vendor Selection). Preliminary business cases indicated a potential cost savings of $24+ million over a five-year period
• Validated vendor capabilities and financial status
• Affirmed savings expectation of more than $24 million in supply chain management and more than $5 million for information technology
• Proceeded into contract negotiations based on customer review of due diligence results