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    High Performance Materials Company Success Story

    Supply chain disintermediation helped a performance materials company which has pioneered technologies in the ceramics, electronics, glass and pigments market reduce its direct materials costs by $24 million

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    Executives Speak

    Find out how a CEO and CFO significantly improved EBITDA across two businesses

When a CFO and CEO wanted to see measurable savings in direct materials procurement, they called on our experience to make it happen

The Challenge

When the procurement function at this high performance materials company was not delivering to certain expectations, senior executives engaged Maine Pointe to help them elevate it to high maturity and save $18M in the process.

The in-house procurement team often reported that they were making savings but the CFO was not able to see them coming through on the company’s P&L. Our first step was to analyze where savings could be made and to deliver measurable, sustainable results, which would allow the procurement team to strengthen their position as a world-class organization.

This story is for executives who:

  1. Are concerned their business does not have full control of its direct materials spend.
  2. Want to reduce costs and position their company as a best value provider.
  3. Want to take their procurement function to a higher level of maturity.
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Taking control of direct materials spend

We examined our client’s data to identify where they were spending and who their high value suppliers were before putting into place a solution which included:

  • Supply chain disintermediation - bypassing tier 1 and tier 2 suppliers and dealing directly with producers wherever feasible
  • Implementing and training the procurement and extended team in strategic sourcing category management
  • Enabling the procurement and extended team to develop a repeatable strategic sourcing process for all commodity and direct material categories
  • Introducing a Procurement Management Operations System (PMOS) which reviewed all procurement procedures step-by-step, identifying best practice, resolving gaps, and eliminating redundant procedures
  • Introducing new metrics to monetize procurement initiatives and delivery of a sustainable process which provides the CFO with ongoing performance metrics

The cornerstone of our solution was to train, mentor and work with our client’s, already professional, internal team to operationalize further step changes in performance.

The Results

As a direct result of the strategic analysis of the supply chain environment, Maine Pointe and our client’s newly created cross-functional teams implemented a global optimal sourcing model. This improved access to low-cost country producers and direct-to-source raw material providers without a compromise on quality.

  • Exceeded the company's expectations to realize annual savings in excess of $24M
  • Achieved a 10% reduction of cost on impactable spend
  • Improved senior executives' visibility of savings and procurement performance
  • Enhanced sales team’s ability to improve margins and pricing flexibility
  • Achieved a ROI of 7:1
 
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Breaking the supplier stranglehold

Increased optionality has significantly strengthened our client’s negotiating position, turning the tables on several of their most intractable chemical suppliers. These suppliers had previously demonstrated an entitled approach to supplying materials to our client, going so far as to threaten  supply flow and even withholding shipments when any attempt was made to negotiate a better price. This left the company fearful of challenging non-competitive pricing and causing any further upset. As a result of the initiative to address poor supplier behavior, this situation has completely reversed. The suppliers are now eager to offer competitive prices and are actively petitioning our client on what they need to do to be “rewarded” with some future volume; a major win for our client.

Post-Engagement Sustainability

Our team identified a number of additional opportunities for savings which, post-engagement, the upskilled in-house procurement team has been able to close on. In addition, the PMOS that we developed has continued to deliver incremental savings.


Lessons Learned for Other Executives

  • It is possible to get greater value from your existing supplier base
  • You can generate significant savings through supply chain disintermediation
  • You can leverage savings made on direct procurement to become a higher-value provider

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