Over $500,000 in additional savings through active category management in fourth year of relationship for $300MM manufacturer

Situation:

Initial sourcing efforts for this $300MM manufacturer had yielded significant savings – averaging 10 – 15% during the initial sourcing of their indirect categories. The company and ICG Commerce had worked together to centralize procurement, increase leverage and purchasing power with suppliers, streamline procurement processes, and gain more visibility and control over company-wide procurement expenditures. To maintain the cost reductions and drive continuous cost improvements, the company launched a category management effort targeted at price management, cost avoidance, process improvements, and appropriate category re-sourcing.

Solution:

The ICG Commerce team worked closely with the customer category stakeholders to develop a framework of cost reduction, cost avoidance, and process-improvement strategies that could be applied to ensure active price management and to address specific category opportunities. The improvement strategies included active market analysis, re-sourcing, renegotiation, product substitution, supplier rationalization, increased supplier volume, and supplier compliance management. Over the last 18 months, 43 separate cost-containment and reduction efforts have been completed across a wide range of categories, including Packaging, Paper, Chemicals, Lumber, and Office Supplies.

Results:

Through their focused category management, the team was able to exceed their goal and deliver over $500,000 of sustainable savings in the fourth year of the agreement:

• $193,000 in savings by using market analysis and competitive information to drive additional price decreases
• $187,000 in savings by proactively re-sourcing existing agreements
• $88,000 in savings by actively negotiating to reduce or eliminate blanket price increases
• $36,000 in savings by increasing supplier adoption and meeting volume commitments