Leading consumer-foods company packages $16MM savings through global sourcing

Situation:

Leaders of a $5 billion packaged-foods company had developed a menu of highly aggressive EBIT goals for 2003, aiming to lower total supply-chain costs and dramatically improve their global competitive position. As a central focus of the program, procurement operations were targeted to strategically source over $400 million in annual category spend, while contributing $32 million in savings.

Solution:

The company hungered for a partner that had the skills, capabilities, and proven experience to conduct training on sourcing skills, optimize supply-chain performance, rapidly source key categories, and apply deep market expertise across multiple categories, including ocean freight and MRO. ICG Commerce was chosen to lead the charge.

To begin the program, the company launched a three-wave, 44-week strategic sourcing initiative, covering more than 15 key spend categories, including MRO, ocean freight, resins, truckload, IT, and steel. In addition to seeking a total strategic-sourcing solution, the company also desired to expand their procurement technology platforms through application of advanced eSourcing tools, including eRFPs and online reverse auctions. Over 50 customer personnel became actively involved in the global sourcing initiative, receiving intensive training in sourcing methodologies, supply-market analysis, total-cost-model development and strategy design.

Results:

Although designed as a three-wave program, the strategic sourcing initiative became self-funding upon completion of the first phase, while dramatically exceeding the original savings targets on the first five categories sourced-including significant cost reductions in the client's global ocean freight category, and even amid rising freight fees. Midway through the initiative, the client has realized over $16 million in EBIT improvements-meeting or exceeding all original savings targets-while aggressively evaluating other spend categories to add to the current package.