When traditional levers like financial engineering are exhausted, Operating Partners are reevaluating how value is created—and where it’s overlooked. One of the most underutilized yet high-impact tools? Strategic sourcing and vendor management. In 2025, this discipline has become a core component of the PE operating model—one that drives EBITDA gains, strengthens cash flow, and enhances exit readiness across the portfolio.
Procurement: The Underleveraged Engine of Value
In many portfolio companies—especially in sectors like manufacturing, healthcare, and consumer goods—procurement can account for 50–70% of total costs. Yet too often, it’s managed as a decentralized, reactive function. Legacy vendor contracts, fragmented spending, and limited oversight leave millions in value untapped.
By taking a strategic, data-driven approach to sourcing—from raw materials to SaaS subscriptions—Operating Partners are transforming procurement from a cost center into a performance accelerator. Every dollar saved in this function drops directly to the bottom line—and compounds over time.
Short-Term Wins: Cost Optimization Through Vendor Management
The first step is visibility. Operating Partners begin by auditing contracts, analyzing spend, and benchmarking supplier performance. These diagnostics often reveal overlapping vendors, suboptimal terms, and missed volume discounts.
One proven tactic is vendor consolidation. By reducing supplier counts in categories like packaging or logistics, portfolio companies simplify operations and strengthen their negotiating position. Leveraging cross-portfolio buying power, Operating Partners secure better rates, tighter service level agreements, and improved terms.
Long-Term Gains: Building Operational Resilience
But the real value lies in sustaining these gains over time. Leading firms embed procurement improvements into the operating model using techniques like:
- Category management to assign strategic oversight to high-impact spend areas.
- Performance-based contracting to align vendor incentives with company outcomes—such as cost reductions, delivery timelines, or product quality.
- Process integration to simplify AP workflows, improve forecasting, and support supply chain agility.
These moves turn procurement into a scalable function that supports future growth while controlling risk and cost.
The Operating Partner’s Playbook
Operating Partners are uniquely positioned to lead this transformation. With a mandate that spans the portfolio, they bring cross-sector insights, execution rigor, and the authority to drive adoption.
The process typically starts with spend mapping and opportunity identification. From there, a tailored roadmap targets high-impact categories and builds internal alignment. Crucially, the best Operating Partners don’t just execute—they embed a value-focused mindset across the organization, ensuring results persist long after the hold period.
Case in Point: Transforming Procurement at Scale
Consider a recent engagement led by E78. A U.S.-based public relations company —newly acquired by a PE sponsor—had launched an internal cost-cutting program targeting $12 million in savings on $31 million in spend. E78 expanded the scope of cost-analysis to include both supply-side and demand-side expenses. Now addressing $87 million in spend, the team implemented eight strategic sourcing workstreams, renegotiating hundreds of vendor agreements. The result: by partnering with internal procurement teams, E78 identified an additional $14M in savings.
By embedding E78 along side the internal procurement team, the PR firm identified a total of $26 million in annualized savings—more than double the original target.
This outcome wasn’t just about cost—it reflected a rethinking of procurement as a strategic lever tied directly to value creation.
Conclusion: Strategic Sourcing as an Imperative
In a market where exit multiples are compressing and capital costs are rising, Operating Partners must find new ways to create and preserve value. Strategic sourcing and vendor management offer a powerful, underutilized lever—one that delivers fast ROI and durable operational strength.
For Operating Partners ready to rethink procurement as a driver of transformation, the opportunity is significant. The firms that lead here won’t just trim costs—they’ll build leaner, stronger, and more exit-ready businesses. Contact E78 to learn more.
