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$500 Million Manufacturer (Private
Equity Owned): Earnings Optimization Assessment & $24 Million Cost Reduction
Project
Business Challenge
A global manufacturer with multiple divisions and plants on three continents
sought to improve earnings and leverage its global spend. ISG was hired to perform
a global procurement Earnings Optimization Assessment to identify cost
reduction targets and a strategy for driving earnings improvement. Once complete,
ISG was engaged to execute the recommendations.
Approach
ISG partnered with a European firm to assess major costs, analyze the global
procurement process, and perform a full Spend Analysis. Visiting plants
in the U.S., Europe, and Asia, the team interviewed dozens of executives and
stakeholders across multiple divisions, performed extensive benchmarking and
analysis, and developed comprehensive findings.
The team recommended the creation of a global sourcing organization while maintaining
a local purchasing function. ISG also identified extensive near-term cost reduction
opportunities and recommended multiple longer term Strategic Sourcing
initiatives.
All recommendations were accepted, and the team began an 18 month effort to
deliver $24 million in earnings improvement and to build a new global procurement
organization.
Results: Creation of a Global Procurement Organization & Above-target
Savings
The project is on-going but results to-date include:
- Over $4 million in savings from 'Wave 1' categories on a goal of $2 million
- Launched multiple Low Cost Country Sourcing projects, seeking global
best cost and quality for each commodity in locations such as China, India,
and Eastern Europe
- CEO approval of a global sourcing organization design and the appointment
of a Global V.P. of Sourcing
- Performed Strategic Sourcing & Negotiations Training for key
executives and stakeholders
Sourcing categories include:
- All Transportation and Logistics Costs
- General Expenses & Packaging
- Raw Materials: Rubber, Plastic, and Metals
- Parts & Services: Molds, Machined Parts, Tooling, Stamping, Plating,
and others
- Make or Buy / Outsourcing Analysis for multiple areas
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