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Using strategic procurement to reduce spend when demand falls (CS295)



This story is for CEOs who

  1. Are struggling with a procurement department that cannot control spend

  2. Lack critical information on their conversion costs

  3. Are leading a company that is global in scope but lacks standard goals, KPIs, and processes

The Challenges 

A specialty chemical manufacturer experienced declining demand for their key products. Although the company operated globally with over 3,000 manufacturing sites and about $2B in revenue, they lacked the processes and metrics to reign in $1.7B in procurement spend. Each plant operated autonomously, resulting in redundant contracts and suppliers. Because no one was responsible for procurement data, the company lacked trustworthy information on their conversion costs, and suppliers bid on inconsistent and outdated specifications that did not meet the needs of plants.

Validating data, analyzing spend, and creating cross- functional teams for sustained savings


SGS Maine Pointe:

  • Analyzed both direct and indirect spend
  • Established trustworthy data on conversion costs
  • Evaluated and streamlined suppliers, stopping the proliferation of redundant contracts
  • Clarified specifications to ensure consistency within categories and across sites
  • Trained and restructured the global organization to lock in and find new savings even after SGS Maine Pointe left

Lessons learned for other executives

  • Companies that ignore indirect spend are leaving money on the table
  • Visibility into total conversion costs is essential for finding and prioritizing savings opportunities
  • Trustworthy data is key to efficient, cost-effective procurement

The Results

  • Saved $35M in year 1 procurement
  • Improved visibility into direct and indirect spend
  • Reorganized and upleveled procurement for sustained savings
  • Established trustworthy data on conversion costs
  • Identified and reduced redundant contracts
  • Achieved 5.3:1 ROI

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