Strategic Sourcing and Purchasing Process – Mid-Sized Manufacturer
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Situation
- Mid-sized consumer products manufacturer had centralized its U.S. purchasing organization concentrated U.S. spend with a limited number of suppliers
- Additional opportunities for savings existed through global sourcing, optimizing specifications, creating flexible formulations and integrating with suppliers
- Poor communication, alignment and teamwork between Marketing, Purchasing and R&D, in U.S. and globally
- Senior management needed to find additional purchasing savings to offset rising commodity prices and support expanded marketing efforts
Actions Taken
- Implemented standard, multidisciplinary strategic sourcing process to improve global integration of Purchasing, R&D, Marketing and Manufacturing/Supply Chain organizations in sourcing strategy and decisions
- Strategically sourced $300M in direct material spend, employing value engineering and supply chain optimization methods to reduce costs through spec improvement, supply chain cost reductions and global sourcing
- Developed modifications to Purchasing organization to drive improvement in consolidating global spend, accessing emerging market suppliers, aligning Purchasing and R&D, and implementing raw material hedging strategies
Results
- Sourcing teams are implementing revised sourcing strategies driving over $25M in annual cost reductions on $300M in spending
- Teams have improved flexibility of formulations and specifications to enable timely responses to changes in relative prices of raw materials, e.g., to support
- Purchasing, R& and Marketing are using standard processes to align cost reduction priorities, charter initiatives, track progress and resource teams