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Moving to a center-led strategic sourcing organization to drive collaboration and release cash (CS213a)


213a

 

 

Driving change across 18 entities spanning seven countries and five continents

 

This story is for CEOs who:

  • Need to bring shareholder value through optimization of multiple sub-business units or who expect to add multiple business to their current holdings
  • Have huge amounts of information but don’t use meaningful proactive data to drive decision making
  • Want to drive measurable, accelerated improvements across a decentralized organization

The Challenge

A multinational construction equipment manufacturer built through the acquisition of 18 entrepreneurial companies was suffering inefficiencies and loss of market leverage due to decentralized procurement practices. The organization’s stock price was under pressure and activist investors were demanding action. Senior executives had no visibility into company data and were unable to accurately forecast future requirements, resulting in a misalignment between sales expectations and inventory. This, combined with a lack of communication between the businesses, meant no one in the organization had an accurate picture of what was happening in the market. Leadership engaged Maine Pointe to help them achieve millions of dollars of annualized, sustainable savings in procurement and across all 18 subsidiaries on five continents.

Creating a ‘big picture’ enterprise

This was a highly innovative business with a very strong product. However, the decentralized model and lack of data meant leadership was operating in the dark. Maine Pointe’s team made use of advanced data analytics to give them the visibility they needed to take advantage of the economy of scale offered by a center-led approach. We applied a multi-path, Total Value Optimization (TVO)TM approach which included: Procurement and negotiation skills-transfer, organizing and facilitating supplier conditioning events, implementing a procurement management operating system, shifting to strategic sourcing driven advanced data, moving to a center-led organization structure, deploying our leadership and organization improvement team to coach and mentor people across the client’s organization. Our solution included:

  • Tailoring our approach to the culture and requirements of each individual business unit to maintain a “local touch” while deploying consistent processes across the company and leveraging global efficiencies
  • 141 individual sourcing events were completed by Maine Pointe consultants in conjunction with client cross-functional team members. Each of these sourcing events was based on combined data from 18 sites and followed the proven Maine Pointe six step Procurement Management Operating System. The repetition, in each of these events, with cross-functional team members and the PMOS built a foundation for sustainable gains
  • Incorporating over 50 client personnel into cross-functional teams. Delivering three days of intensive negotiation skills transfer and direct negotiations with suppliers to a subset of 19 team membersDeveloping and implementing real-time procurement dashboards in parallel with sourcing activities
  • Using procurement dashboards to provide a first ever capability to analyze the combined spend of all 18 manufacturing entities in real-time
  • Developing and implementing a central-led strategic procurement organization structure to ensure the organization has the capabilities to sustain the gains of the engagement
By introducing and embedding center-led thinking, sourcing capability and expertise and leveraging economy of scale, we were able to deliver financial benefits that exceeded the CEO’s expectations. These processes are now an integral part of the client’s strategic sourcing toolkit.


“ Our supplier base now understands that we bring a much larger spend to the market than was
previously visible. We now understand the risks and opportunities within our supply chain. I would
recommend Maine Pointe to any organization looking to transform their procurement, sales and operations
planning and data analytics capabilities into competitive advantages.”

-Client CEO

 

The Results

Maine Pointe’s hands on approach and cross-functional, Total Value Optimization (TVO)TM methodology delivered the following benefits:

  • Released $51M in cash
  • Improved EBITDA by 12% in ten months
  • Delivered a 6:1 ROI
  • Delivered average savings from 9% to 33% across parts, materials and logistics services, frequently exceeding the client’s initial expectations
  • Implemented demand forecasting tools that provided warning of market shifts
  • Created visibility for improved decision making through advanced data analytics
  • Ensured sustainability through mentoring and skill transfer
  • Delivered millions of dollars of benefits in just 15 weeks
  • Implemented supplier relationship strategies for new and existing suppliers


Lessons learned for other executives

  • Supply chain transformation can only succeed when leadership recognize the need for change and
    are fully committed to making it happen
  • Delegating authority to local business units without a corporate approach can significantly impact executive visibility and financial performance
  • Allowing engineering to source production quantities during development can lead to inefficient behavior

Talk to us.

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