Value and savings in a double-digit inflationary global market (CS257a)
Enhancing people, process, data, and supplier relationships to improve performance
This story is for executives who:
- Are experiencing an inflationary commodities market and headwinds
- Are coming out of bankruptcy or going through M&A
- Need to rebuild trust with employees and suppliers
A global manufacturer and producer of high-tech automotive systems was recovering from its second bankruptcy filing while going through M&A.
The challenges of the business environment had damaged the company’s culture and processes. Lacking visibility and control, it had failed to honor supplier commitments and terms, damaging its reputation with key suppliers. At the same time, many of the most experienced people were leaving the business.
Starting with due diligence, Maine Pointe was brought in to look at the company’s procurement and logistics functions. This uncovered the potential to save several million dollars across global spend. The subsequent engagement focused on realizing those savings through strategic procurement, data analytics and leader & organization improvements.
Developing people, processes, visibility and control
Maine Pointe’s engagement team found a large procurement function (around 60 people) working in individual silos. People didn’t have visibility to spend categories, benefits tracking wasn’t solid, and savings validation processes did not exist. Across the organization, more than 1,700 internal procurement initiatives were achieving some good results, but a lack of clear roles and responsibility meant people didn’t trust the cost-savings worksheet that tracked them. Solid sourcing processes were in place, but insufficient training meant people were unaware of them and the supply base had proliferated.
In addition, a drain of talent from the business (both planned and unplanned) meant the people who would have supported the annual planning process were no longer with the company. Working across the client’s global sites in a rapidly rising commodities environment Maine Pointe:
- Created an ORCI® chart for supply and used it to clarify roles and responsibilities
- Secured support for the savings project from the company’s cross-functional teams and the procurement council
- Applied data analytics to deliver accurate control of, and visibility to spend, implemented compliance dashboarding to increase adherence to contracts
- Facilitated a virtual global Supplier Forum to communicate the financial viability of the organization and to begin engaging with suppliers in joint cost reduction initiatives
- Consolidated the supply base, leveraging incumbents wherever possible to avoid the lengthy and costly process of qualifying new parts and suppliers
- Implemented Maine Pointe’s six-step sourcing process to drive sustainable savings
- Developed KPIs and data-driven annual operating plan
In a very challenging commodity market, sending clear and consistent communications to condition suppliers while gaining visibility and control across the business enabled the client to make substantial savings and strengthen relationships with its people and strategic suppliers.
"This is the strongest, most accurate material budget we have ever had."
-Chief Procurement Officer
Maine Pointe helped our client increase the maturity of its procurement function and achieve measurable results:
- Reduced procurement costs by 6% in a double and triple-digit commodity inflationary market
- Implemented a new annual sales planning process
- Improved existing procurement processes and implemented a strategy to sustain savings
- Agreed new roles, responsibilities and director-level business plans
- Developed dashboards to provide visibility, control and process
- Achieved a 5:1 project ROI
Lessons learned for other executives
- Early and accurate visibility to market risk can mitigate damage to your business
- In a challenging environment, care must be taken to avoid damage to culture and process
- Implementing reliable benefits and savings tracking to provide measurement can drive significant value in the most challenging market conditions
- Clear, regular communication is critical to building confidence with your people and suppliers