A leading manufacturer of professional power tools, this company is a $1.3 billion division of a $4 billion global enterprise. With five manufacturing plants in the U.S., a joint venture in Asia, two facilities in Europe, and three major distribution centers across North America, the company serves a wide range of industries.
Escalating transportation costs driven by the demands of a service-oriented customer base.
Serving a customer base dominated by “big box” retailers, the client was under pressure to deliver annual price reductions. While joint ventures in Taiwan and China supported finished goods production, their global sourcing strategy for components was underdeveloped. KGM analyzed 8 manufacturing sites and over $700 MM in annual expenditures to identify opportunities. Preliminary savings estimates ranged from $13.0 to $19.0 MM.
KGM executed a strategic sourcing and outsourcing initiative spanning 30 direct spend categories over 2.5 years. The team trained and collaborated with over 100 client professionals to strategically source all 30 categories and conducted a make vs. buy analysis on 7 of the 30 categories. In total, the client negotiated with and visited 180 suppliers across 13 countries.
The project delivered over $32 MM in realized cost savings from Phase I (cumulative project savings from all phases exceeded $140 MM annually) and contributed to a $0.18 annual earnings per share improvement. Several international suppliers were selected, including 3 Chinese suppliers for both components and value-add operations as part of a “buy” decision. The client reduced its supply base by 45%, improved supplier on-time delivery by 75%, and enhanced quality by 35%.
