An employee-owned chemical distributor was leaking away its spending—and profits—on indirect operating expenses. Vantage helped them realize $149,000 in annual savings—while addressing safety issues. Could you leverage the Vantage expertise?
At Vantage Cost, our principals and team of national experts have decades of supply chain savvy.
That expertise helped an employee-owned chemical distributor realize ongoing savings totaling hundreds of thousands of dollars.
The distributor’s significant buys were centrally managed, but they delegated their sourcing of indirect operating expenses to 11 facilities across the Mid-West. For their part, senior management believed that they were very strong in chemicals sourcing and negotiation, but believed there was room for improvement on the indirect side.
Rather than task an already-overloaded corporate manager, they engaged the resources and category expertise of Vantage Cost to drive savings for indirect operating expenses.
In doing so, they leveraged one of the key value propositions of Vantage Cost: We do 95 percent of the work, allowing your team to focus on your core competency.
Spend Visibility Achieved
Vantage Cost’s strategy from the outset included achieving spend visibility across the entire organization and finding opportunities to strategically source as many national contracts as possible. Quantifying those opportunities can be difficult: It is uncommon for middle market companies to have an electronic data source for indirect spend. Vantage Cost dedicated our resources to gather spend data from paper invoices and identified the following areas of opportunity:
- Express Mail
- Industrial Gases
- Maintenance, Repair & Other Operations (MRO)
- Office Supplies
- Uniforms & Mats
Equipped with an enterprise-wide view of indirect spend, the Vantage Cost team began the process of consolidating spend data from all 11 facilities and identifying sources of supply where buying leverage could be maximized. Savings of 27 percent were achieved in express mail by negotiating a new contract with a single supplier. The same was true for industrial gases, MRO, office supplies, uniforms and mats. Before the project, there were six suppliers of industrial gases. After the project, one preferred supplier remained and a 37 percent cost savings was achieved. In the MRO category, five suppliers were consolidated to one with a 25 percent cost savings, and the burden of inventory management was simplified. A 17 percent savings was found in office supplies and 11 vendors were reduced to one, leaving a standard electronic catalog across the entire company and enhanced controls for management.
Safety Issues Addressed
New safety standards for flame-retardant clothing are starting to emerge in the chemicals industry and the safety manager was intent on providing his employees with a greater level of protection. The downside is that flame retardant uniforms are significantly more expensive. Vantage Cost analyzed relevant factors and tailored a program to fit the company’s needs. Vantage Cost consolidated 11 separate agreements into one, standardizing the safety specifications across the company.
In addition, the Vantage Cost team negotiated a 51 percent reduction in mats, which helped to mitigate the additional cost of the uniform safety upgrade.
$149,000 in Annual Cost Savings
All told, this employee-owned company was able to enjoy annual cost savings of $149,000, increased safety standards, and optimized supply chain management. In a competitive industry, this chemical distributor has a strengthened ability to withstand the ups and downs of turbulent economic conditions.
How could you leverage Vantage Cost’s supply chain savvy?