Strategic sourcing for an electrical supplies manufacturer

Challenge

The US operations of a global electrical supplies manufacturer had been conducted on a fragmented basis, involving four separately-managed subsidiaries. New leadership, backed by private equity owners, believed that more sophisticated and integrated sourcing could boost bottom-line profitability. The challenge was to identify the most promising spend categories, determine the sourcing levers available and lead the decentralized purchasing teams through a strategic sourcing initiative.

Approach

• Objective setting: Established, with the CEO’s strong support, an aggressive goal for savings.
• Spend baseline: Constructed and analyzed the existing ‘spend cube’ by category, operating company, supplier and spend amount.
• Lever identification: Using our sourcing stages of excellence model, determined which elements (e.g., spend consolidation, new suppliers, formal RFP process, demand management, product substitution) would drive gains for each category.
• Opportunity quantification: Developed, through mini-RFPs and other forms of benchmarking, the opportunity for gains in each selected spend category.
• Sourcing process: Led the sourcing process for each of 33 categories.
• Capability assessment: Evaluated the organization’s existing purchasing and sourcing capabilities (people, processes, technology) and recommended changes.

Results

• Identified $33 million in savings on spend of $220 million, substantially exceeding management’s aggressive target.
• Provided an action plan for capability development across the purchasing organization.
• Implanted a strategic sourcing process and a performance measurement system for ongoing use by the client’s own staff.