CASE STUDY

How Supply Management Solution Helped an Industrial Materials Manufacturer to Reduce Inventory Costs – A SpendEdge Case Study

Apr 6, 2019

The Business Challenge

A process manufacturer of industrial materials based in North America had a business objective to maximize shareholder value of the company. Their prime focus was to improve profitability and asset utilization, with a productive P&L and balance sheet. The company’s products were on the edge of being commodities without offering much product differentiation from competitors. The primary means of gaining and holding market share was quality and this required them to enhance supply management.

Additionally, the company was vertically integrated and had limited sources of raw material in most of the major product lines.  This meant that the company often had to enter into long-term contracts with vendors to ensure supply and operate facilities to capture byproducts from other industries’ processes to obtain material. The quest for increased profitability compelled the company to engage with SpendEdge and determine cost reduction opportunities in every part of the company while improving the supply management process.

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Solutions Offered

The experts at SpendEdge worked closely with the client to analyze strategies and identify alternate approaches to provide a realistic assessment of risks and ensure that the client receives the best value-for-money. They consolidated suppliers within specific supply markets, reduced purchasing and supplier management costs and increased the efficiency of their supply management process.

Prior to this collaboration with SpendEdge, the negotiating opportunities didn’t exist for the client as they competed for material in the constrained marketplace, so vendor price negotiations and seeking of large-scale, free, value-added services were not considerable options. Moreover, all of the inventory was sold, and it was taking time to place it, which was resulting in poor margins for the client. SpendEdge’s supply management services helped the client to work with stakeholders without being tied to any one supplier. This helped them to identify suppliers who can offer the shortest lead time and the most competitive pricing among the available sources. The supply management strategy offered improved the production process and helped the client to

  • implement effective demand forecasting functions in the divisions
  • establish documented procedures for forecasting
  • inventory planning and management
  • production planning

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Key Findings

In a span of six months, the supply management strategy devised by SpendEdge resulted in the reduction of inventory carrying costs by approximately $0.7 million per year on an investment of $200,000. The business process implemented further redesigned warehousing process and offered additional corporation-wide transportation savings.

Deployment of supply management strategy helped the client to gain detailed insights and change the supply management policy so that customers can receive continuous supply. This redesigned their customer service process and improved brand value by ensuring timely delivery of products. In addition, the supply management solutions lowered supply-chain costs and boosted their overall profitability.

How Does Supply Management Work?

Supply management is a business process that involves the coordination of pre-production logistics and inventory management. The key aspects of supply management are oversight and management. It involves oversight and management of suppliers and analyzes their contribution to the company’s operations. An effective supply management process includes:

  • Identification and procurement of goods and services that are crucial to a company’s ongoing operations.
  • Establishing supplier management process to improve relationships with suppliers.
  • Implement procedures that facilitate the procurement process.

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