Case study REF#15
The Challenge & Our Findings
implementation
results
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THE CHALLENGE

Change negative cost trend for direct material purchases globally

A global construction materials client faced a 2-3% year-over-year increased cost of goods sold in a competitive and price-sensitive marketplace. 50% of COGS was driven by direct material purchases of $470M. The client tasked ArMur Consulting with fundamentally changing the negative cost trend for direct material purchases globally.

OUR FINDINGS

Identified six items for improvement

  1. 55% of direct material spend was not under contract, and there was no clear ownership for sourcing categories
  2. $35M in the “Other” category of global purchases did not have an owner
  3. The procurement staff was highly tactical and reactive
  4. The team lacked a Management Operating System to create continuous improvement
  5. The organization lacked tools, training, and process know-how to implement strategic sourcing that could leverage their global spend
  6. Limited supplier performance management tools/structure
  7.  
 
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IMPLEMENTATION

We focused on 2 areas of impact

Categorized spend and assigned ownership in the Procurement organization.

Ranked vendors according to strategic importance to focus limited resources on key vendors.

Redesigned sourcing processes and trained staff on supplier conditioning to improve the terms offered to our client.

Conducted a series of price renegotiations with key suppliers.

Instituted supplier consolidation and alternate vendor selection practices.

Engaged business unit leaders in providing strategic direction and focusing Procurement efforts.

Implemented a Procurement Management Operating System to drive focus and discipline globally.

RESULTS

All delivered with a 23:1 Return on Investment

Annualized Savings
0 M
Reduction in COGS
0 %
Reclassified previously unmanaged $42M in spend
0 %
Reduction of unfavorable freight PPV
0 K
In-house product savings (after being previously tolled)
0 K
Reduction of single-source suppliers
0 %

The Project certainly generated a significant number of immediate cost-saving opportunities to tackle together with Audere Partners and plenty of other options for us to chase on our own longer-term

Global Procurement Director

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