Case Study: US Global Manufacturer
Upon PAI’s recommendation, a global initiative was implemented that involved countries in Europe and the US. Situation An alarming downward trend was occurring in the core business of PAI’s international client, the largest heavy equipment manufacturer in its industry. Intense foreign competition and the recent acquisition of a key supplier were resulting in lower capital.
Upon PAI’s recommendation, a global initiative was implemented that involved countries in Europe and the US.
The Situation
An alarming downward trend was occurring in the core business of PAI’s international client, the largest heavy equipment manufacturer in its industry. Intense foreign competition and the recent acquisition of a key supplier were resulting in lower capital investment and the need to cut operating costs.
PAI’s client wanted to deliver value to its business by:
- Swiftly reducing operating expenses
- Right-sizing their Procurement function
- Delivering continuous value through strategic supplier relationships
- Establishing the category management process as its standard for all of its Procurement professionals
- Reducing inventory
The various supply base situations ranged from “many suppliers doing business independently with multiple client locations” to “small embedded supply base resistant to commercial leverage.” Consequently, the impactable spend of approximately $975 million was not being leveraged for global benefits in most cases.
Due to the acquisition, the client also found themselves with two solid, traditional procurement organizations that favored engineering-oriented approach to procurement. This resulted in a strong procurements focus on qualitative attributes such as quality and design, and less of a focus on the quantitative considerations like cost and delivery.
The Solution & Resulting Benefits
Upon PAI’s recommendation, a global initiative was implemented that involved countries in Europe and the US. An intensive education program was conducted with the cross-functional client teams on the processes and tools of category management. PAI next provided the facilitation, project management and coaching to the teams to ensure breakthrough results.
Substantial changes were recommended, and subsequently implemented, that included creating supplier competition through specifications changes that forced suppliers to develop synergies that were beneficial to both parties. In addition, strategies were developed that rationalized and leveraged the supply base not only for savings, but innovation and quality. Long-term strategies for transforming the critical supplier relationships from leverage to strategic were also developed and adopted.