Developing Cutting-edge Cost Reduction Solutions with the Help of Strategic Sourcing Analysis – A Packaging Industry Engagement
Engagement Overview: The client, a leading manufacturer of paper products used in the packaging industry, wanted to analyze their sourcing strategies and develop a cutting-edge cost reduction strategy. To do so, the client approached SpendEdge to help them leverage its strong expertise in strategic sourcing analysis to enhance spend visibility and drive profit margins. This […]
The client, a leading manufacturer of paper products used in the packaging industry, wanted to analyze their sourcing strategies and develop a cutting-edge cost reduction strategy. To do so, the client approached SpendEdge to help them leverage its strong expertise in strategic sourcing analysis to enhance spend visibility and drive profit margins.
This engagement entailed the use of a detailed quantitative analysis of various categories within the supply chain to develop the best sourcing strategy. During the course of this strategic sourcing engagement, our procurement experts leveraged proven cost reduction strategies for both direct and indirect spend categories. Moreover, working alongside our sourcing experts helped the packaging industry firm to promote enterprise-wide efficiency while meeting their cost reduction goals.
About the Client:
A leading paper products manufacturer producing over 30 million metric tons of paper products per year.
Paper products aren’t going away in the digital age, but the industries sure are transforming themselves to keep abreast of the changing market landscape. Confronting digital transformations brings in several new challenges for players in the packaging industry.
The packaging industry client had grown a great deal in recent years by absorbing other smaller organizations operating in the same industrial landscape. However, owing to such acquisitions, it found itself battling several challenges common to organizations that employ mergers and acquisitions as a growth strategy. To overcome such challenges the company recognized the tremendous scope for leveraging strategic sourcing analysis and positioning themselves for higher growth through higher profit margins and lower debts.
This strategic sourcing engagement entails the development of a robust sourcing strategy that helped the paper products manufacturer to realize huge savings in indirect and MRO spend. Also, it helped them reduce sourcing costs by 20 percent.
How did SpendEdge Help the Client?
Our strategic sourcing analysis experts joined forces with the packaging industry client to help them analyze their sourcing strategies and develop a robust strategy that focuses on cost reduction.
This process involved the development of a five-step strategic sourcing process, which can be categorized into the following phases:
- Step 1: Supply market analysis and category profiling
The initial step revolved around the process of analyzing the supplier’s marketplace for potential risks and opportunities. Understanding various spend categories acts as the essential first step in any strategic sourcing analysis engagement. This involves defining each category and the commodities related to each category.
- Step 2: Strategy development
Conducting an external review of the supply market is a pre-requisite to any strategic sourcing engagement. However, the key to developing a robust strategic sourcing strategy lies in deciding how to procure materials easily while minimizing the associated risks and cost. In this engagement, we devised a robust strategy by considering the competitiveness in the supply market and the alternatives to the existing suppliers in the market.
A detailed review of the supply market further helped the packaging industry client to gain a clear understanding factors affecting their sourcing strategies. Also, with the help of such detailed market inputs, the client was able to comprehend the near-term changes in the business environment.
- Step 3: Selecting the sourcing process
It is essential to select a feasible sourcing process and ‘Request for a Proposal’ for soliciting bids. The devised sourcing process included factors such as delivery requirement, product specifications, pricing strategies, and other essential evaluation criteria.
- Step 4: Supplier selection and negotiation strategies
This step deals with supplier selection and the development of negotiation strategies. Though the process is a tedious one, multiple rounds of negotiations helped the client to develop a list of the best suppliers and shortlist the suitable negotiation strategies.
- Step 5: Implementation and benchmarking
The developed approach helped the packaging industry client to achieve their cost reduction objectives; thereby, raising the bar for enhancements in profit margins. This five-step approach to strategic sourcing enabled the client to devise the best suitable strategy to drive category growth. Doing so resulted in a 20% reduction in sourcing costs, improvements in profit margins, and enhancements in ROI.
Key questions answered in this strategic sourcing analysis include:
Benefits of the Engagement:
With the help of SpendEdge’s strategic sourcing analysis, the packaging industry client was able to analyze around $30 million worth of spend data. This helped them identify the best strategy to reduce cost and enhance procurement efficiency. The other aspects of the solution included – category specific sourcing strategies, the creation of TCO models for key categories of spend, and a detailed supply market analysis.
Why is strategic sourcing analysis important for packaging industry players?
Packaging industry firms often tend to overlook the substantial savings that strategic sourcing can offer players in the packaging and shipping category. ‘Packaging’ as a category has witnessed several changes in the supply market over the past few years. The volatility of raw material prices, consolidation in the industry, increasing demand for green packaging, and the rapid changes in regulations are a few macro factors that have had a momentous and long-lasting impact on the packaging supplier market. Additionally, being core to several other business functions, the risks associated with this category and its impact on price changes are significant. Hence, procurement officials are required to keep abreast with such changes to not just reduce costs but also drive category growth.
SpendEdge’s strategic sourcing analysis begins with the detailed understanding of the supply market to help organizations adapt to the changes. Our experts make sure they understand the specifics of your organizational requirements to develop the best strategy that enables the development of an optimal mix of products and suppliers at the lowest possible price. SpendEdge’s expertise in strategic sourcing analysis spans several spend categories and sub-sectors across industries, making it one of the top procurement leaders in the world. SpendEdge has also assisted leading market players across industries to achieve breakthrough savings on the procurement spend, reduce supply chain risks, and develop stronger supplier relationships.
This strategic sourcing engagement points out to the fact that besides develop new and innovative products, companies have to gauge their direct and indirect spend categories to drive savings and ensure a healthy bottom line. However, driving best-value sourcing can be difficult without the use of a robust strategy and timely supply market intelligence. Strategic sourcing analysis not only helps in cost reduction but also paves the way for organizations to confront the ever-increasing procurement challenges.
If your organization is on the lookout for an objective way to reduce procurement related costs, we’re here to help. Wait no more! Go ahead and get in touch with our strategic sourcing experts to develop custom configured engagement models and procurement research deliverables.