Minor Suppliers Driving Major Issues
Creating time for our client to be able to manage their primary suppliers while we took on the tail spend.
Case Details
Client Sector: Industrial
Client Size: $xxxM
Project Duration: Ongoing
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Introduction
Our client is a global leader in the material handling industry, with a reputation for designing, engineering, and manufacturing high-performance and quality lift trucks and warehouse solutions. They have a strong commitment to innovation with a focus on utilising emerging technologies telemetry to find new ways to deliver and excel in customer care. From a foundation of decades of experience in being a leader in the industry they continue to offer a high quality in demand product to market with both EV and ICE power solutions.
About our client
As with many companies they were challenged with a number of suppliers who were proving difficult to manage. Issues included: managing compliance, master supplier agreements, adoption to supplier portal, supply commit integrity, labelling, specification management, payment terms. These suppliers would be categorised as those with a lower spend profile or a low cadence of engagement due to infrequent purchases. This type of spend is often referred to as tail spend.
It can be difficult for a customer to create the time to manage these types of suppliers when the primary focus was on procurement of high spend items and ensuring that these critical materials and parts for production were sourced efficiently. These are in direct contrast to the smaller, low-value, high-volume purchases which are out of focus until they cause production impacts due to shortages or quality issues.
Why did they need us?
The key challenge for our client was gaining visibility and control over their tail spend supply without taking the focus of their procurement team from effectively managing the strategic and core spend. Their existing processes and procurement structure drew resources from their procurement team into low add value functions of tail spend management. This resulted in:
- Wasted time and resources – At times sourcing and supply management of strategic and core spend was under resourced due to the need to micromanage low value spend suppliers.
- Complexity – multiple suppliers result in multiple contact points and multiple relationships to manage.
- Risk – As many of these vendors refused to engage with the client’s supplier portal line of sight of supply was challenging, with a consistent risk of decommits in supply.
- Financial – reducing buffer stock levels to minimise obsolescence risk and the working capital employed to fund same, moving to a dynamic stock holding model.
Why did they choose us?
Once our client had identified the risks and operational inefficiencies caused by unmanaged tail spend, they began seeking a solution. With our proven expertise in tail spend management as part of our managed procurement service we were an obvious fit. Obvious because of our ability to offer a bespoke solution to fit their needs, supported by an in-house team of SAP developers, a vastly experienced procurement team and existing relationships with a broad range of suppliers.
In addition, our ability to combine spend analysis, supplier consolidation, process automation and economies of scale across existing suppliers. We differentiate ourselves from other providers that offer generic procurement solutions by tailoring our approach to fit our client’s specific needs. This ensures we act as an extension of the existing procurement function with our client’s organisation whilst also leveraging our own skillsets and procurement assets.
What solution did we create?
Effective management of tail spend requires a structured approach that enhances visibility of supply, maintains quality, increases efficiency and improves forecasting.
After analysing historical spend data to identify trends and opportunities for consolidation. We worked to identify stock strategies which aligned with the demand fluctuations and variances against forecast to ensure sufficient stock at all times without driving excess inventory. An exhaustive review of master data was required to ensure this was done correctly. High-quality procurement data improves supplier relationships, enhances cost control, and reduces risks associated with poor data management.
Relationship building with suppliers to improve communication on supply commits and material changes was a key element to our success. Building relationships gave opportunity to improve payment terms, optimise units of measure in line with factory need, negotiate improved minimum order quantities and utilise opportunities for supplier consolidation to improve supplier pricing.
Replacing multiple supplier points of contact with one customer facing point of contact in our team, allowing for hundreds of parts, hundreds of suppliers and hundreds of relationships to be managed in one conversation. This freed up significant time and resources for our customers, especially when it was back up with 100% on time delivery for all sites. This truly turned low spend vendors into low touch model.
What were the results?
The impact of our solution was immediate and measurable:
- 100% on time delivery, We have consistently 100% on time delivery scores for all supported manufacturing sites.
- Consolidation of supplier base, achieving cost savings, improved supplier performance, and a more resilient supply chain.
- Optimising stock holdings, holding stock of what is needed when it is needed, reducing expedite fees, excess stock and obsolescence risk.
- Increase in procurement efficiency, outsourcing tail spend to us allowed our client to focus on strategic and core spend.
- Enhanced visibility and control, with real-time data insights allowing for better budgeting and decision-making.
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