In six months, Vantage helped a leading North American window manufacturer company bolster its bottom line by $4.1 million, implement major spending reductions and revamp its supply chain. What savings could Vantage see for you?
At Vantage Cost, our expertise surpasses merely achieving savings. While we see saving opportunities where others don’t, we’re also adept at helping enterprises and C-suite teams navigate difficult supply chain management waters and hard-to-negotiate management channels.
In 2012, the CEO of a leading North American manufacturer with approximately $450 million in annual revenues engaged us to accomplish exactly that: alleviate multiple strains on profitability and achieve rapid results in overhauling the supply chain.
The privately held company, a leader in the door and window industry with 11 plant locations across the U.S., faced rising energy and material costs. Meanwhile, an anemic recovery in the residential construction market further threatened profit margins.
Pointing to a shrinking bottom line, the business’s operating partner—a private equity firm—pressed management to find savings, but they were uncertain whether any saving opportunities existed. If they tried to squeeze costs out of their incumbent suppliers by bringing in a third party, they feared that strong relationships with their supply base would crumble.
Vantage saw a fragmented supply chain management approach that had led to comfortable incumbent suppliers, and plants frustrated with senior management’s seeming inability to institute sweeping, necessary changes.
Vantage knew we could execute these changes deftly, all while delicately interfacing with the private equity operating partner and senior management. Our approach: Balance the operating partner’s demands for savings with the management team’s relationships with suppliers and stakeholders.
Assessing Spending, Untangling the Supply Chain
Vantage’s charge: Conduct an initial assessment of the savings opportunities; provide estimates for key categories and develop a plan to capture the savings with specifics for each category; and then implement those savings. In addition, the manufacturer asked us to capture any other savings opportunities we could find. High level spend data was readily available from their ERP system, but in many key categories, more granular data had to be secured from the incumbent supplier.
Once the required item-level cost models were built and validated against the spend, Vantage implemented a more a competitive approach in the marketplace. Some suppliers had their business reduced or eliminated, and new suppliers were added. The incumbent suppliers understood the need to remain competitive within the supply chain so that everyone could win. Many of the suppliers, including the incumbents, appreciated Vantage’s overall efforts, because opportunities for further joint cost reductions and future sales opened up and were executed.
Breakdown of Savings
Some of the categories were very difficult to reduce, because only a handful of suppliers existed. With a constrained supply capacity, there were switching cost hurdles, but Vantage still delivered. Spend areas such as packaging, emerged as additional opportunities for cost reduction. This also was a category where a dozen or so suppliers were eliminated, and a standardized pricing mechanism for corrugated was established across the suppliers. Within the logistics category, the freight rates, mode, and load capacities were all areas of opportunity depending on the lane, and whether it was inbound or outbound.
Millions in Total Cost Savings
The result? In six months, Vantage helped the manufacturer identify and implement $4.1 million in annual savings.
At the beginning of the project, the COO pointed out that the firm did not believe there were any substantial savings to be realized, and any effort to achieve them would damage the supply base.
He was “impressed in the handling of what was felt to be a no-win situation for everyone, and surprised by the results.“I am a true believer in [Vantage’s] capabilities and [their] ability to add significant value to the bottom line,” he said.