A bank is trying to increase its operating efficiency. Your consulting team has been asked to look at the non-interest, non-personnel expense base in order to cut costs. How would you determine the potential size of the opportunity for operating efficiency? What issues might arise in such a study? This is an exercise in full-value procurement (FVP). FVP is a rationalization across business units of common purchases and services. The measure of an FVP is the amount of "spend" reduced, defined as the cost savings realized by reducing the number of sources from which common products/services are purchased. (This question, and questions like it that require advanced frameworks, are much more likely to be received by business school candidates and case interviewees with significant business experience than by undergraduates with no business experience.)
In this case interview, your interviewer will impersonate the client. Case interviews often take this kind of role-playing form (which can be fun!).
You: What is your revenue level on an annual basis like?
Interviewer: In 2003 our revenues were $1.2 billion. (These seem to be the revenues of a prosperous regional bank, not a bulge bracket.)
You: What are the common items and services that all business units use? Do you have common office suppliers or housekeeping services?
Interviewer: Well, obviously we have most common office products shared across all our functions. We also have cleaning services for our corporate headquarters, our printing center, and our retail locations.
You: How many vendors provide similar products and services to the bank?
Interviewer: We buy office products from OfficeMax's corporate services in Indiana, Avery Dennison corporate services in California, and someone else, the name of which escapes me right now, for the retail banks. Also, I believe we contract regionally for housekeeping services.
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