Indirect Materials Cost Reduction
£750k savings, a 34% cost reduction and reduced risk. That’s the result of our Cartons project
Our Client:
Our Client was a medical device manufacturer specialising in drug delivery devices. A UK born and bred company they also have a strong presence in Europe and the US. A tail-end supply base approaching 1000 companies could be seen and virtually none of their suppliers were covered by contracts or Service Level Agreements.
Project:
Our brief was to introduce a new carton supplier to minimise supply risk and improve COGS (Cost of Goods Sold).
Actions:
After fully understanding the needs of the business through a detailed and thorough sequence of meetings with key stakeholders we developed a comprehensive on-line RFQ process using our iCEO (Intelligent Cost and Efficiency Optimisation) e-RFx software. We drilled down to 6 competent suppliers and held an industry-first supplier day to standardise expectations and learn from their experience. Following this and a second round of bids we created a shortlist of 3 companies for which to go into face-to-face negotiations. Another round of negotiations and executive agreement highlighted a new primary supplier choice with the incumbent as a secondary source. Following the procurement process, we project managed through the implementation, negotiating and finalising commercial agreements along the way.
Result:
Our client now has a primary and secondary carton supplier in place with clearly negotiated and understood terms of business including service level agreements and KPI’s. The procurement process delivered an outstanding 34% cost reduction with contract benefits totalling over £750,000. The internal stakeholders have new ways of working including providing quarterly demand forecasts to the suppliers. The entire end-to-end process took just under 12 months with benefits commencing after the first 16 weeks.
Summary:
In summary, a new supplier was identified offering a 34% cost reduction. We significantly mitigated risk by maintaining the incumbent as a second source. We introduced and trained in new and innovative ideas such as utilising technology to support the process (our clients first) and the supplier day (an industry first.)
