An international reseller with over 10,000 SKU’s and 900 vendors was tasked with meeting a corporate material cost reduction goal of 3%.
The client initiated purchase orders for items they needed or when they thought they needed them. Buying behaviors were driven by a reaction to a field-generated sale or a forecasted demand created by their ERP system. System set min/max levels, suggested order quantities, and minimum order quantities were used for inventory replenishment. Widespread duplicate part numbers were found on multiple orders, i.e. the same item appeared on different PO’s. Inconsistent specifications for the same or similar products, i.e. size, thickness, other features, caused pricing variation. Lead times were unpredictable due to the use of multiple manufacturers and suppliers. This internal inefficiency created unnecessary cost burdens for the client and their suppliers who were challenged with having to react to small chunks of data and expedite small orders.
In collaboration with the clients’ product managers, sales and procurement teams, we developed a product specifications standard and a simple replenishment process. By sharing information we were able to find ways to reduce the activities related to sourcing, receiving and distributing product. We transformed the supply position to “plan and prepare” rather than “react and hope.” After aligning forecasted demand with a supplier’s ability to deliver we were able to put more emphasis on bundling volume. With our Integrated Supply solution in place, product quality and lead times improved. In addition, the client now experiences the benefits of consolidation and partnering with a single supplier.
- -6% material cost reduction from reduced transactional activity
- -25% procurement cost reduction from streamlining the source to consumption process
- -94% order-count reduction virtually eliminating back orders and expediting fees