Global Capital Equipment Manufacturer Saves
Over $8 Million in Direct Material Costs
A U.S.-based global capital equipment manufacturer with $1 billion in sales was attempting to manage and improve its globally complex resource spend. By 2011, the complexity was proving difficult to manage, and costs and performance were out of line with expectations of the manufacturer. Therefore, the head of corporate sourcing retained the professional services of Transpac Access to help the company address the complexity, and improve the cost structure and supplier performance.
The Transpac Access team worked with the company to assess the current sourcing situation and identified a number of priority areas for improvement, based on their importance to the business, savings potential and ease of implementation. Transpac Access sourcing teams in the U.S., Canada and Germany recommended that the changes be implemented in sourcing “waves” to enable the manufacturing company to build on early successes and use the savings from the first wave of changes to fund subsequent waves.
In two years, the manufacturer saved more than $8 million in direct material costs by sourcing projects on Ariba. Furthermore, in 2013, when the manufacturer acquired a $500 million company in a related industry, Transpac Access was called upon to help integrate purchasing across all divisions and regions of the combined company. To provide global solutions, Transpac Access has utilized its Global Sourcing Network of more than 70 professionals in the United States, China, India, Europe and South America.
Best Practices and Lessons Learned
Not every manufacturing company is new to strategic sourcing, but all benefit from a periodic assessment that measures the effectiveness of their current sourcing strategies relative to market conditions. The best practices and lessons learned from this case study have broad application across industries and geographies, demonstrating that:
- C-level support is essential to ensure the effort receives the appropriate level of resources, support and attention.
- Technology solutions such as the Ariba platform drive consistency, efficiency and cost savings.
- Sourcing “waves” are a good way to start and sustain a strategic sourcing program.
- Companies have to recognize when they need outside help, e.g., when home-grown talent is unavailable and building a team from scratch would take six months or more.
- It pays to work closely with key suppliers, which are often the most underutilized source of performance improvements.