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    Apparel Manufacturer & Marketer Success Story

    Improving product time-to-market, quality and supplier optionality while reducing costs

Using supplier disintermediation to improve global competitiveness

The challenge

Our private equity client believed that there was a significant opportunity in the supply chain of an apparel and specialty footwear manufacturer and marketer they had recently acquired. They invited Maine Pointe to help explore this opportunity with a specific focus on strategic procurement to drive down direct materials spend and improve product time-to-market.

The company had not re-negotiated with its Chinese suppliers and, as a result, had not benefited from a dramatic fall in commodities prices in apparel. This meant that the company’s price competitiveness was poor. In addition, they were paying high prices for their products, unaware that their suppliers were frequently cutting corners.

This story is for PE executives and portfolio company CEOs who want to:

  1. Improve product time-to-market, quality and supplier optionality
  2. Reduce product costs without compromising quality
  3. Investigate supplier disintermediation as a way of improving competitiveness
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Building a best-in-class procurement function 

Our analysis identified that there was a significant opportunity to drive competitiveness. This could be achieved either by re-negotiating a better deal with incumbent suppliers or, failing this, by identifying new suppliers and disintermediating the supply chain. When the existing suppliers proved intractable, Maine Pointe began a process of disintermediation in order to gain control of the company’s suppliers, followed by re-intermediation once trust had been established. Maine Pointe introduced structures and procedures to improve the company’s competitiveness and market share by:

  • Taking the product development process to multimonth rather than multiyear to reduce new product time-to-market and position the company as innovators in their field
  • Building a bill of materials (BOM) to help implement portability, opening up the opportunity to source from lower-cost countries and regions
  • Improving the process for onboarding new suppliers
  • Sourcing lower price/same quality products from new suppliers
  • Helping our client to build a ‘should cost’ model to gain control of their supply chain 

This new approach encourages open dialogue, team decision-making, and interdependent business relationships with a high degree of trust. By doing so, the procurement function has begun to transition away from many of the historic constraints to a new, differentiated model. A model we call Total Value Optimization™ (TVO).

The results

Maine Pointe put in place a structure to onboard new suppliers, qualify and build supplier optionality, while improving the company’s competitive position. Although the company’s CEO was reluctant to change suppliers due to risk considerations, electing to take a very cautious approach in the short term, we succeeded in delivering the following results:

  • Achieved a 17% increase in new supplier introduction rate
  • Reduced costs by 5% in year 1
  • On course to make 9% additional savings in years 2 and 3 as they adopt further savings projects and charters identified by Maine Pointe
  • ROI of 3.4:1 in year 2

Lessons learned for other executives

  • CEO buy-in is critical to achieving higher savings
  • Legacy incumbents may not be innovators in driving out costs
  • Bill of Materials and Quality Assurance is key to maintaining quality and optionality
  • Disintermediation can help drive down costs and provide a path to optionality

"We would not have gone after these savings and benefits without Maine Pointe's insight; they helped us to think differently" Client CEO

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