A leading North American Food Distributor faced rising energy costs and imperiled profitability. Vantage streamlined its supply chain, eliminated 98 suppliers and added $1.6 million to their bottom line. Could Vantage do the same for your company?
At Vantage Cost, we offer you a commanding view of your spending and your industry, helping you see savings where others don’t. Even for industry leaders, this new vantage point can prove valuable. Recently, a publicly traded company in the food distribution industry experienced a strain on profitability, due in part to a significant rise in energy costs.
So, they came to Vantage Cost. After completing a cost-containment project at a Mid-West regional facility, they referred Vantage to their North American headquarters to explore what Vantage Cost could achieve on a broader scale.
With $400 million revenue, 4,000 employees, and more than 50 locations in North America, the food distributor’s decentralized supply chain management created a significant hurdle to a corporate-wide cost containment effort.
In addition, the distributor faced fragmented decision making, maverick spending, and low visibility into spend data. All of these environmental factors led to the decision to engage Vantage Cost to lead and execute a corporate-wide, cost-containment initiative. Despite these obstacles, Vantage Cost delivered. Here’s how:
$12.7M Expenses Examined
Vantage Cost began by establishing clear visibility into the $12.7 million annual spend of:
- Forklift maintenance
- Payroll processing (and other contract services)
- Facility and janitorial supplies
- Express mail
- Office Supplies
- Other operating expenses
It was no simple feat with multiple data sources and subsidiary divisions, but clean spend data was absolutely essential to maximizing savings opportunities. Vantage Cost obtained spend data down to the transaction level through review of paid invoices at four different A/P cost centers. Armed with the ability to make data-driven decisions, Vantage Cost moved into the strategic sourcing phase of the project. Vantage Cost brought in a mechanical expert to review the overall forklift maintenance program. In this area alone, Vantage Cost achieved just under $1 million in savings by centralizing the procurement of aftermarket forklift parts in the U.S., restructuring the outsourced maintenance agreement in Canada and negotiating national contracts to procure lift-truck batteries and vehicles.
Other areas of savings included 27 percent reduction in annual payroll processing charges, 22 percent savings in stretch film and 12 percent in office supplies.
Savings in payroll processing were achieved with the incumbent supplier, thereby eliminating any hidden cost of change. The two main drivers of savings in this area were Vantage’s benchmarking data and negotiation experience. The procurement of stretch film and office supplies were brought under a centralized view, thereby leveraging the spend across the entire organization. In both cases, significant reductions in the supply base were also achieved. The same was true for uniforms and mats. After the strategic sourcing process, all uniforms and mats were consolidated to one national supplier, yielding $70,000 in annual savings while eliminating redundant activity within the organization—and simplifying contract management.
$1,592,000 in Total Cost Savings
In total, strategic sourcing efforts produced $1.6 million annual savings. Additionally, 98 suppliers were eliminated through supply base rationalization
Looking back on the project, one business unit leader pointed to the case of payroll processing as the moment he clearly realized the value Vantage Cost added to the project. He remarked that if his company would have tackled the area themselves, they would have been happy with the 10 percent reduction the incumbent initially offered, and probably moved on.
But backed by benchmark data, Vantage Cost led a second round of negotiation that resulted in a 27 percent reduction. The business unit leader said he never would have known the additional 17 percent savings was available.
Breakdown of Savings
How can Vantage Cost help you?