Raw Material Sourcing Success Story: More Suppliers Participated plus Time and Hard Dollar Savings
If your colleague increased supplier participation, saved time and generated hard dollar savings, wouldn’t you want to know how they did it?
Let me share some of the highlights of this success story at an international manufacturing and distribution company.
The direct materials category manager kept hearing rave reviews about a new sourcing platform from the indirect category manager.
Since she had the annual RFP coming up for a very key raw material, she decided it was time to make a change and use the new platform.
Some background on the process that had been in place:
- Her manual process was based on email communication, PDFs, and Excel spreadsheets.
- It was time-consuming and tedious, and she felt that savings were being missed.
- There never seemed to be enough time to complete a thorough analysis of the total cost of each bid.
- In the prior year she invited 8 suppliers to bid. Other suppliers could have been invited but this would have made the process even more time-consuming.
- Several suppliers asked for time extensions to participate.
- This extended the time to complete the bid by several weeks.
- It also reduced the analysis and negotiation time.
Highlights from the new process using the cloud-based sourcing platform:
- The number of suppliers invited for the initial round was increased from 8 to 13. She was able to do this because suppliers can be added with a few clicks and because the tool automatically generates standard and customized analysis reports.
- The existing Excel bid template was uploaded into the tool with one click. Then it was modified to separate raw materials and transportation bids into separate buckets.
- Questions were added to the template to capture other TCO costs.
- Additional hidden calculation columns were inserted. This created apples-to-apples TCO comparisons based on the supplier’s responses and other factors like switching costs.
- The modifications to the bid template took less than 2 hours to complete.
A Summary of the Results:
- All suppliers participated and submitted their initial bids on time.
- A second-round “best and final” bid was sent to 9 of the suppliers and it was launched in less than 1 hour.
- The bidding on the second round was completed in 4 days.
- The tool generated a variety of reports that made it easy to evaluate and rank the bids.
- Time to launch and analyze the RFP was reduced by 40%.
- Hard dollar savings exceeded $5 Million or approximately 5%.
- Based on the success of this bid, the tool is now being used on other raw materials as they come up for renewal.
- This has generated an additional $7 Million in savings.
The category manager is thrilled with the results and so are her superiors.
The ability to add suppliers while reducing analysis time was a huge benefit.
Plus, it was unexpected based on process that was in place.
How much would you be willing to invest to generate $12 Million in savings in less than 2 years?
I can assure you it will be considerably less money and a lot less time than you expect.
This could be your story a year from now.
If you want to learn more, set up a 30-minute discovery call.
That is normally all the time it takes for us to determine if our platform can help you. If it can’t, we will part friends.
Ask better questions, make changes and 2020 will be your best year ever.
Action Step: If you are uncertain where to start the process of change, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want.
If you want to go explore this topic in greater detail, please contact me. I invite you to request 30-minute discovery conversation. In my experience the next step will be apparent at the end of the call. I never assume that what I have to offer will be right for everyone, so don’t expect a sales pitch. You can reach me at 973-936-9672.
If you would like to know more ways to reduce costs without changing the way you do business, simply give me a call or send me an email with your contact information and the best time to reach you.
You Won’t Drift to Success
Commit to taking the next step.
Until Next Time, I Wish You Great Success in Your Business and in Your Life