Tag: Strategic Sourcing Best Practices

strategic sourcing

A Leading Steel Company Leverages Strategic Sourcing Solutions to Achieve Annual Savings Of $17 Million

The Business Challenge

A leading steel company, that exhibited a great deal of growth in recent years by acquiring other steel organizations, was facing problems that were common to enterprises that employ mergers and acquisitions as a growth strategy. The acquired companies lacked common item codes and offered tremendous scope for streamlining processes. This compelled the company to collaborate with SpendEdge and achieve better cost savings in indirect and MRO spend. The target set by the company to reduce sourcing costs was 15% since for organizations like them, this reduction constitutes a considerable sum.

Apart from this, the company was looking forward to improving their overall efficiency, maximizing their financial performance, and driving product innovation by implementing a competitive global strategic sourcing process. The key objectives they were looking to achieve through strategic sourcing were:

  • Control spend data by having an organized system in place for their parts information to avoid any hidden charges.
  • Determine the cost structure of suppliers, have a strong sense of the market situation and implement strategic purchasing.
  • Optimize cost savings by reducing reliance on tier 1 suppliers(direct suppliers).

Controlling spend data can maximize the financial performance of companies. Request a free proposal below and access our complete portfolio of strategic sourcing solutions.

Solutions Offered

The experts at SpendEdge obtained detailed market intelligence information on the supply market and supplier landscapes from different plants and suppliers. They tracked activities and innovations to help the client understand best sourcing and category management practices and develop robust strategic sourcing process. The information gained, therefore, enabled them to deploy the right sourcing strategy and negotiate more favorable terms with suppliers, taking advantage of the client’s significant economies of scale.

Deployment of strategic sourcing strategies led to the creation of cost optimization models for key categories that helped the client to identify sellers that quote width adders in intervals. Parts with widths close to a larger interval category can be sourced less expensively if the coil width is increased to the breakpoint. This helped the client to increase savings potential by smartly using the excess material for offal utilization.

SpendEdge’s strategic sourcing strategy further allowed the client to manage risks such as resale programs and hedging. This ensured secure supply at better managed costs for the client. Such resale programs offered better savings by attracting suppliers that offer favorable pricing. The strategic sourcing strategy filled up the capacity in the value chain and enabled the client to negotiate lower pricing for value add processing through the intermediate steel processors.

The strategic sourcing strategies evaluated options of buying from different suppliers or from different plants from the same supplier for the client. This helped the client to re-allocate the processing to a low-cost producer in the value chain.

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Key Findings

Streamlined the Procurement Process

In a span of one year, the strategic sourcing process developed by experts at SpendEdge streamlined the procurement efforts of the client. This enabled them to save between 15 and 20% depending upon the category and accounted for an annual savings of $17 million a year. The number of suppliers reduced significantly, which streamlined numerous operations while reducing costs for the client. Also, it helped in developing mutually beneficial strategic alliances with individual suppliers.

Enabled the Usage of Mini-Mills

The strategic sourcing solutions rendered further helped the client to shift volume to suppliers in other countries and import that steel at low enough prices to stay competitive despite higher transportation costs. They gained detailed insights to increase the usage of mini-mills to create more leverage in the steel purchasing process. Mini-mills offered competitive pricing as transportation costs are low and profit margins considerably high.

What is Strategic Sourcing and Why is it Important?

Strategic sourcing is an organized and collaborative approach adopted by organizations that formalizes the way information is gathered and used for strategic purchasing. It leverages targeted spend across locations with selected suppliers that are best suited to creating knowledge and value in the customer-supplier interface. 

Strategic sourcing enables organizations to take advantage of innumerable benefits while focusing on their core competencies. It mitigates risk, enhances the quality of goods and services, ensures timely delivery of goods and services, reduces costs, and improves supplier relationship. The key reasons for adopting strategic sourcing best practices are:

  • Quality of Supplies: Strategic sourcing strengthens relationships with suppliers and ensures timely supplies of materials. It results in quality improvements and streamlines the procurement process
  • Cost Reduction: Strategic sourcing solutions help companies to negotiate lower unit prices for high-volume purchases, thus, maintaining a competitive pricing of their products. Also, strategic sourcing strategies allow management to focus on core activities.
  • Risk Management: With a strategic sourcing process, companies can proactively identify and resolve problems pertaining to suppliers. This can reduce supply chain disruptions considerably.

Implementing strategic sourcing best practices helps companies to mitigate risks and enhance the quality of goods and services.  Get in touch below and know how our experts can help you in implementing the same.


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How Can a Cost-effective Strategic Sourcing Process Benefit Companies?

Strategic sourcing process

Even now, many companies consider purchasing to be simple and merely a means to an end. The key aim of any procurement team is to meet the financial requirements while minimizing costs for their organization. Most teams, therefore, pitch competing suppliers against one another to cut purchasing costs. This hardly gives companies any scope to formulate an effective procurement strategy and build goodwill among suppliers. As a result, companies find it challenging to implement a strategic sourcing process and improve their overall purchasing efficiency. Following this traditional purchasing approach results in a lack of visibility, missed opportunities, and cost synergies for businesses. The absence of a strategic sourcing process also hampers the quality of products and negatively impacts the decision-making process.

At SpendEdge, we understand the impact that following a cost-effective strategic sourcing process can have on your business. And to help sustain profitability, our team of experts has highlighted some of the key benefits of following a strategic sourcing process. Though knowing more about the key benefits of a strategic sourcing process can help businesses achieve significant cost-savings, let’s first understand why companies need it and the impact it can have on your business. (more…)


Cosmetic Products Strategic Sourcing: A SpendEdge Case Study

Cosmetic products brands not pursuing innovation in their supply chain and making use of the strategic sourcing best practices are facing lower revenues globally and paving way for new players to capture market share. Click To Tweet

Today, cosmetic products brands are generally shifting away from big-spend traditional media campaigns and toward smaller, but more varied and more dynamic digital or multi-channel communication. Such a communication is often two-way, involving direct and semi-direct interaction with customers, fostering closer relationships, request proposal allowing data collection and, as a result, advanced behavioral segmentation and personalized promotional campaigns. However, with the rise of digital media, more particularly social media, comes a challenge of catering to the increasingly product-educated customers in a context in which other consumers’ opinions and social networks are increasingly integrated into the decision process.

Business Issues

  • The client: One of the leading cosmetic products brands in the US
  • Area of Engagement: Strategic sourcing

The client – is a leading American fortune 500 global retailer specializing in cosmetic products including bath, beauty, fragrance, and candles. The company is headquartered in Ohio, U.S. One of the core objectives of the client was to reduce the cost of goods associated with corrugated box supplies. The client also wanted to standardize and reduce SKUs for select items and incorporate strategic sourcing best practices across 11 plants and distribution centers in nine countries across the globe. Faced with this challenge, SpendEdge was engaged to coordinate procurement efforts in different countries, including rationalizing SKUs and consolidating suppliers.

Benefits of Strategic Sourcing Best Practices

Strategic sourcing is the foundation for deep change within a supply chain that leads to better financial gains. With all the obligatory tasks facing an organization, improving procurement and adopting strategic sourcing best practices is the effective way to work toward better business.request proposal Additionally, strategic sourcing is an approach to robust product procurement that continuously re-assesses and evaluates a company’s purchasing behavior to increase the overall profitability.

Key questions answered in our strategic sourcing engagement

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Client Journey

The strategic sourcing experts at SpendEdge tailored a comprehensive research approach which included qualitative and quantitative data collection procedures coupled with primary and secondary research methodologies to help the client gain better visibility into their sourcing and procurement processes and identify the major areas of spends. The experts also amassed information from various proprietary sources to further help the cosmetic products manufacturer reduce the cost of goods associated with corrugated box supplies.

The Solution Benefits and the Business Impact

With the help of SpendEdge’s strategic sourcing best practices engagement, the cosmetic products manufacturer developed detailed supplier evaluation criteria and pricing worksheets to make the supplier selection most effective. Additionally, all suppliers, including incumbents, were ranked based on criteria and assigned weights to create the auction shortlist. Final supplier selection recommendation was made based on qualitative assessment scores, geographic coverage, previous experience with the vendor, quality audit results, request proposal approved samples, and product development and tooling costs. This helped the client identify savings of 35%, compared to their current spend

Cosmetic Products Brands Future

Today, consumers are increasingly conscious of the environment, ethical, and social implications of consumption and production. As a result, individuals expect businesses to share their concerns, which means a company must commit to a responsible use of resources in development and production, across their value chains, which gives rise to a whole new level of innovation across all areas of the cosmetic products industry.

A must-read case study for procurement specialists and decision makers looking to develop an understanding of the cosmetic products brands across the globe

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