MRO Sourcing and Procurement Case Studies
The Indirect Sourcing and Procurement needs of companies involved in highly competitive industry segments vary significantly. Each day, our team demonstrates the comprehensive yet flexible nature of our capabilities by simultaneously meeting the financial objectives of corporate leaders while fulfilling the unique requirements of their individual operating companies, divisions and facilities.
A multi-billion-dollar major industrial products manufacturer and current client of DSSI was purchased by a private equity firm and underwent intense vetting of its total business operation.
Scope:
The private equity firm brought in a management consulting group to assess the customer’s total business operations—their top tier supplier contracts, perform risk assessments to evaluate vulnerabilities within the business and offer future state recommendations. The consultants aggressively pursued avenues to obtain information about DSSI and its relationship with the customer.
Process:
Over the course of 6 months, the consulting firm reviewed DSSI’s financial disclosure statements, purchasing services agreement with the customer, the business model and program performance metrics. Additionally, the firm wanted to know what the customer’s view was. A survey was designed and distributed to all 19 customer plants including site management leaders and key users who directly engaged DSSI. The survey sought to gather comprehensive feedback regarding DSSI’s e-Procurement tool, Epic®, price competitiveness, catalog depth, quote timeliness and other program specific measures.
The customer shared the results of the survey with DSSI, including positive feedback and areas of opportunity. The customer also requested DSSI to provide an action plan with recommendations for how it could continue to work on continuous improvement opportunities. DSSI responded with a comprehensive action plan that addressed all aspects of the survey in its entirety.
Results:
All the hard work and analysis paid off at the end of the evaluation process when the consulting firm deemed DSSI’s services “Best in Class” and recommended the customer expand the relationship. DSSI’s comprehensive action plan was reviewed with the customer’s leadership team and two additional areas of opportunity were identified.
The first was for DSSI to support tail-end spend which was not currently part of the program. DSSI was given 30 days to respond to this sourcing request. Not only did DSSI meet this timing objective successfully, the customer was presented with a 16% savings solution on their high tail end spend items.
The very next month, the customer requested DSSI source and support additional spend that was not currently part of the DSSI program. This second sourcing project represented more than $8M in incremental program spend opportunity, including the chance to consolidate portions of their MRO buy currently being supported by three of the major distributors in the industrial supplies market. The customer informed DSSI it was interested in dissolving these direct supplier relationships and working toward optimizing its MRO purchasing experience through DSSI. Initial sourcing results, based on the same manufacturer name and manufacturer part number revealed 27%, 20% and 17% cost savings against the customer’s current direct pricing deals for each of the three suppliers. DSSI finds these results common when sourcing is performed with its item-level management and an aggregated model versus the “discount off list” type of arrangements commonly put in place with large distributors.
The customer was very pleased and committed to mutual continuous improvement activities recommended by DSSI.
A major consulting company recommended a consolidated MRO supplier strategy to a Fortune 500 manufacturing company. The consulting firm then negotiated a deal on behalf of this major company and portrayed the new deal as an 11% decrease compared to previous sourcing. DSSI was asked to “host” this new contract within its Epic e-procurement system so that the client could gain effective implementation of the new deal through an efficient and consistent platform. Throughout the course of six months, DSSI was able to track the new contract pricing with its highly detailed spend analytics and compare it to its own aggregated price point on the same items from the same and different suppliers to ensure the client was really getting optimized pricing. After numerous irregularities in pricing were noticed, a full pricing review was completed and it was determined that the client was actually paying over 20% more in aggregate when compared to DSSI’s group aggregated pricing. Multi-client aggregation, category optimization strategies and item-level detailed contract management, based on manufacturer name and part number, are the basis of DSSI’s competitive pricing. Only through the type of analytics this information provides are procurement teams able to make the right decisions for their business.
Through the use of highly detailed spend analytics, the DSSI team regularly identifies high-spend items for each of its clients as their spend changes. Recently, DSSI buyers undertook a project to review 56 high-spend items for one of its clients, a large Tier 1 Automotive Supply company. At the end of its review, the team had negotiated savings of 8% across all the items resulting in annual savings of $15,500. A separate review of the client’s high-use items within one plant revealed 2 in particular that were re-negotiated resulting in additional savings of 15.5% or $5,000 on just those two items.
On behalf of all of its clients, DSSI tasks itself with not only achieving piece price savings, but reducing the need for RFQs and additional work so that plant employees can focus on what matters – keeping the operation running. DSSI achieves this, in part, by regularly reviewing commonly ordered items and ensuring each is added to the Epic catalog for easy re-order. Recently, DSSI buyers worked to add 2,500 commonly stocked electrical supply items, including sensors and connectors, providing quality descriptions and images for each. DSSI also negotiated pricing guarantees on these items through 2018 to ensure consistency and reliability in the category.
A large Tier 1 automotive supplier challenged DSSI to extend its services into Europe to create an enterprise MRO solution that included its EU operations. Within 6 months of beginning the project, DSSI opened a European office, hired personnel, established a supplier network and assumed all MRO buying activities. Within 1 year, DSSI had achieved piece price savings of 12.5%, transactional savings of 3.5% and increased its regional presence to support the client with over 20 employees and a network of 3000 suppliers. As of 2017, DSSI had increased its presence in the EU to almost 50 employees helping to connect clients with over 6000 suppliers.