Supply Management Transformation

What works

Most company managers are able to recognize the need to transform their supply management when they are faced with a significant event such as launching a new line of products, acquiring other businesses or losing sales from a supply chain catastrophe. However, reasonable success or steady growth can mask potential problems managing a company’s spend or opportunities to bring value to the company by smart sourcing.

It is not uncommon for managers to ask for a quick fix, only to recognize that deeper changes will have payoffs over a longer period of time. ADR works through a structured set of steps that identifies opportunities for immediate savings, then continues to transform business systems, organization and personnel to sustain continuously improving results over time.

Case Study

A recent client with $1.7 billion in sales from a diversified set of business units needed to find ways to leverage its size and create synergies from autonomous divisions that were spread out around the world. The goal was both value and cost improvements. ADR’s approach was to create a collaborative process for the company’s global procurement organization.

We assembled cross-functional, global teams and developed, trained and assisted the teams as they created new communication channels to identify common categories of purchases that would give the company the ability to leverage and create synergy-building strategic and tactical commodity plans. Collaborations also brought differences in practices into sharp focus, where they could be evaluated against best-practice benchmarks.

Creating new purchasing strategies based on the kind of “ground level” input from around the world gave the company a better chance of buy-in than solutions imposed from the top, down. Teams that discover their own synergies or opportunities for leveraging are more likely to have ownership of the new strategies – giving them sustainability over the long haul.

As we organized from the bottom, up, we also moved from the top, down with a set of key suppliers. We called a summit and requested immediate cost reductions and/or rebates that resulted in savings in excess of $1 million. Success for the project depended on:

• A steering group to provide leadership and guidance
• Strong executive-level support for change
• Strong process control to assure continuing global collaboration
• ADR’s ability to develop the company’s in-house skill levels
• Adoption of priorities for change – with short, medium and long-term category spending plans

Results of the work are ongoing, but they generated 8% savings in six months. For example, a global purchasing effort to bid out key categories of purchasing led to cost reductions totaling $1 to $3 million. The global efforts also have included low-cost-country-sourcing and leveraging bigger buys from fewer suppliers to further reduce costs. For instance, consolidating the purchase of printed circuit boards across multiple divisions generated significant savings. Sourcing metal stampings from China saved 60% on those parts. In all we expect cost reductions in excess of $25 million by the time the project activities are completed.