Using data analytics, AI, and category sourcing strategies to unlock savings, operational clarity, and role definition (CS314)

From Fragmented Procurement to High-Performance Supply Chain: $20M+ in Savings for a Global A&D MRO Company

Using data analytics, AI, and category sourcing strategies to unlock savings, operational clarity, and role definition

This story is for CEOs and PE firms who

• Need processes, tools, and governance to unlock their company’s full economic potential
• Have a very fragmented supply chain
• Lack access to detailed cost data and insights for decision making to optimize COGS
• Are concerned about rising material and logistics costs

The Challenge

A manufacturer of MRO, PMA, and Used Serviceable Material (USM) parts for the Aerospace and Defense industry had grown mostly by acquisition over many decades. This growth resulted in a highly fragmented supply chain and procurement organization spread across 14 locations. Spend was disaggregated and leadership was dispersed both geographically and culturally. Rising costs and poor supplier management had slowed growth, while turnover in the executive suite had created problems with governance.

Internal stakeholders preferred to bypass the procurement organization, creating friction and cost leakage. Accountability and compliance to procedures throughout the organization were lax.

The Private Equity sponsor asked Maine Pointe to work with the company’s leadership to create and drive a more strategic approach to material sourcing, reduce procurement and logistics costs, and upskill the procurement organization’s process and capabilities.

Overcoming lack of process rigor, cost management, and governance

Maine Pointe:

• • Unified a fragmented supply base through 34 sourcing events using a six-step methodology
  • Reduced material costs by creating competition, introducing over 50 new suppliers; established the relative value of in-sourcing vs. out-sourcing; and implemented a new channel of supply for OEM parts
  • Reduced logistics costs by clarifying customer-responsible charges and shifting from premium to lower-cost freight while maintaining service
  • Built make-vs-buy and CapEx optionality models using advanced analytics
  • Enhanced governance with reporting and tracking tools for contracts and logistics spend
  • Developed scorecards for all sourcing events
  • Trained 35 cross-functional team members in 6 PMOS training modules to run sourcing consistently
    
    

  Lessons learned for CEOs

  • Expertise, process rigor, and governance are required to gain the focus and alignment that is critical to successfully execute cross-functional transformation
  • Fragmented organizations drive higher procurement costs and miss optimization opportunities  
  • Reliable data and strong governance are essential to transform procurement and reduce costs
  • Highly skilled procurement professionals with consistent process governance are critical for success
    
    

• • 5 ROI achieved
  • $20.4M in annual cost savings
  • $1.6M in additional savings identified
  • 90% increase in visibility and validity of spend data using AI tools
  • Introduced over 50 new suppliers to create optionality and price/service competition
  • Improved supplier relationship management and selection
  • Delivered Leader and Organizational Improvements (LOI) such as organizational design, job description/skill matrix, and clarification of owner, responsible, consult, inform (ORCI) roles
  • Enabled cultural and governance transformation through procurement management operating system (PMOS) training and by engaging 70 cross-functional client team members