12%

reduction of total cost of goods sold

$6.4M

annual cost saving in spend

30-Day

pay term extension on average

Strategic Sourcing for a Global Manufacturer

A large start-up global manufacturing company with a rapid growth trajectory was experiencing significant supply, capacity, and communication struggles within their existing supply base. Most of their current suppliers were in Asia, and their manufacturing facility was in the U.S. Our client struggled to calibrate the performance of their existing supply base, measure the competitiveness of the spend, and efficiently communicate with their current vendors. They retained GSM to perform a complete spend analysis, collect all vital supplier information, assess the existing supply base, identify alternative capable suppliers, conduct a global RFQ, and put governance around all commercial terms for short-term and long-term improvement. The GSM Asia team performed on-site assessments of each supplier to gauge cost, capacity, quality, and management sophistication. Through collaborative engagement between our client, the GSM Global team, and our established supply partners, we quickly mobilized and began to reduce supply chain risk, stabilize costs, and prepare the client for strategic growth. We implemented processes, procedures, contracts, and standardized documentation to create a previously non-existent procurement function within the client’s organization.

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Goals

  • Perform an in-depth spend review of each purchased component
  • Conduct an on-site supply chain risk analysis with the current supply base
  • Identify and assess additional capable suppliers for each spend category
  • Conduct a global RFQ to reduce and stabilize costs
  • Implement and facilitate organizational adaptation of strategic procure-to-pay (P2P) processes
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Obstacles

  • Low YTD volume and poor current commercial terms
  • Limited component spend data
  • No contingent suppliers previously identified
  • Limited preexisting processes and governance regarding material costs
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Results

  • Short-term RFQ conducted with a result of a 3% reduction in cost within the first 90 days of engagement
  • Identification, assessment, and development of 18 new capable suppliers over all spend categories (300% increase)
  • Cost stability measures implemented by executing supply contracts with favorable T&Cs, tracking relevant market indices, and enterprise adoption of GSM executed P2P process
  • Secondary RFQ after six months of adapted P2P process resulted in an additional 9% cost savings
  • Pay term extension of 30–45 days, to reduce the utilization of working capital
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