A $30 million dollar manufacturer was staring down rocketing commodity costs and competition ratcheting up from abroad. Vantage helped them realize $146,000 in annual indirect material cost savings. What savings could you see with Vantage?
Over the span of a decade, Vantage Cost has developed a proven process that helps companies cut costs, boost buying power and maximize supply chain management.
That’s exactly what we accomplished for a $30 million manufacturer.
Faced with rising commodity costs and significant foreign competition, this manufacturer of maintenance and repair products had to find a solution to mitigate the negative impact these forces were having on profitability. The firm’s six-person supply chain group focused significantly on direct material inputs, but saw an opportunity to partner with Vantage Cost and leverage our expertise to drive savings for indirect operating expenses.
$1.8M Expenses Examined
Vantage Cost deployed a team to examine $1.8 Million of expenses in these categories:
- Scrap Metal
- Maintenance, Repair & Other Operations (MRO)
The first step in the Vantage Cost process is to understand precisely where money is being spent.
It may sound simple, but in reality most middle market companies have a difficult time with spend visibility down to line item (SKU) detail.
Most often, a company has only two options of accessing and examining their indirect spend data: obtain a download from the supplier or manually enter the data from paper invoices. A majority of suppliers have the capability to provide the spend data, but are very reluctant to cooperate because they know the data will very likely be used for a sourcing event.
In this case, Vantage Cost provided the resources necessary to compile spend data from paper invoices, allowing the supply chain group to focus on strategic raw materials yet still enjoy the benefits of detailed spend visibility for indirect materials.
Cost Savings Victories
While performing due diligence, Vantage Cost’s team discovered that there was no contract for scrap metal salvage rates. Vantage Cost entered into negotiation with the scrap metal recycler and developed a contract to tie salvage rates to a market index, resulting in annual savings of $44,000.
All of the effort to achieve line item visibility proved fruitful in packaging. Vantage Cost identified six suppliers with $450,000 annual spend and a savings of 13 percent was achieved by sourcing several boxes directly with a corrugated manufacturer— bypassing a distribution channel.
This category displayed Vantage Cost’s flexibility and position as a true partner. Annual spend for fasteners was $156,000 with one supplier. Vantage Cost conducted a sourcing event, engaging the incumbent supplier as well as new sources of supply. Annual savings would have been greater by switching to a new source of supply, but the senior managers had a very good relationship with the incumbent supplier and felt they had an outstanding track record. At the end of the engagement, Vantage Cost satisfied the client’s needs while still producing 12 percent savings with the incumbent supplier.
Part of the Vantage Cost value proposition is our network of subject matter experts. Telecom is an area where category expertise is essential and Vantage Cost was able to bring in a subject matter expert who was able to produce total annual savings of 20 percent (including a 33 percent reduction on Internet services with the incumbent supplier).
$146,000 in Annual Cost Savings
All told, the annual savings from the project was $146,000. Perhaps just as important: Vantage Cost was able to cater to specific needs of the client (i.e. desire to stay with an incumbent supplier) while still delivering significant results.
How can Vantage Cost help your company?