A Case Study in Steel Sourcing:

A Story of Smart Sourcing Strategy

An overview

Our client is a prominent industrial machine builder engaged in transporting logistics equipment and has an annual revenue of $800 million. They sought to revolutionize their procurement strategy. This case study zooms in on their steel plate sourcing practices, which accounted for approximately 27% of their roughly $100 million expenditure on raw materials and components.

The Challenge

Tasked with the complex job of transporting logistics equipment, the company faced a challenge familiar to many in the industrial sector: optimizing procurement without compromising quality. One big expense was getting the right steel plates for their machines, and they knew there was room for improvement.

The tricky part? They had to find a way to spend less on these steel plates without compromising the machines’ quality and breaking the bank. They saw that a huge chunk of their money, a whopping $27 million, was going into buying these steel plates. So, the challenge was clear – find a better and cheaper way to get these steel plates without compromising the quality of their machines.

Our Solution

Instead of just accepting the high cost, we decided to try something new. We got into work recognizing the potential for cost optimization and engaged in a collaborative effort with our cost optimization service. The goal was to reevaluate the existing procurement strategy and identify opportunities for improvement. The targeted approach involved restructuring the purchasing process to focus on major expenses, particularly the sourcing of steel plates.

The optimization process included a meticulous assessment of the current suppliers and exploring alternatives without compromising on quality. The strategy involved identifying as many new suppliers of steel plates as reasonably possible, and ensuring their products met or exceeded the existing quality standards. The selection process prioritized suppliers who could offer equal or superior quality at a more competitive price.

Results

The numbers spoke for themselves. Upon implementation of the optimized sourcing strategy, the company achieved significant savings. The optimized strategy led to a remarkable 12.4% reduction in steel plate sourcing costs. This translated into substantial savings within the overall $27 million steel sourcing budget, offering the company newfound financial flexibility: More than $ 3.3 million in clean savings. The company effectively reallocated these funds to other critical areas, fostering financial resilience and competitiveness in the industrial sector while increasing the profit margin. The success demonstrated that a thoughtful, targeted approach to sourcing could yield significant benefits.

The Takeaway

This case study is a testament to the transformative power of strategic sourcing. By proactively reassessing, restructuring the sourcing process and proactively looking for additional raw material producers, the client not only achieved substantial cost savings without compromising the quality of its essential components but also paved the way for a more resilient and competitive future. By deciding to engage Zignify Global Product Sourcing the client himself enhanced their own financial efficiency through targeted sourcing optimization initiatives.