We recently organized an Executive Roundtable where manufacturing purchasing leaders and c-level executives came together to discuss potential cost saving opportunities. The event was highly insightful, with over a dozen participants from diverse industries sharing their successful (and unsuccessful) cost saving implementation experiences in the current business environment. Additionally, APD presented four real client projects executed in 2023, each yielding substantial savings.
Here are some of the strategies that the roundtable participants found effective in their companies:
- A global castings and machining supplier is focusing on consolidating supplier spend to maximize purchasing power and obtain better pricing. They are also streamlining some indirect spend items like chemicals, gases, and MRO products, opting for regional or global purchases to achieve cost savings.
- An automotive braking and suspension supplier reported successful cost savings through negotiations with Chinese suppliers. They are also working on Value Analysis/Value Engineering (VAVE) efforts with North American suppliers. In the case of European suppliers, they are mainly focusing on cost savings driven by index-driven materials price changes. Additionally, they’ve negotiated reduced costs on inbound freight by capitalizing on fuel economies.
- An electrical panels manufacturer is facing high demand, causing supply shortages for key components. Nonetheless, they have managed to achieve some success with raw material price decreases.
- An automotive exhaust supplier is relocating some of their manufacturing plants to be closer to their customers. They are also implementing a product design initiative that standardizes cost-effective components.
- An automotive electronics supplier is shifting their focus back to Total Cost of Ownership after dealing with low-cost suppliers who couldn’t meet their quality and reliability requirements. They are also collaborating with a supplier building a plant in Taiwan to avoid tariffs on Chinese imports while maintaining proximity to strategic chip suppliers.
- A specialty engineering and manufacturing company has challenged their product design engineering team to create components that are optimized for cost.
- An automotive sunroof supplier is consolidating their direct materials spend with supportive suppliers who helped during supply shortages. They are witnessing significant reductions in freight costs and leveraging volumes through unified indirect purchases. They have also discovered that some commodities, such as injection moldings and assembly equipment, are more cost-effective to source from China, even with tariffs.
APD client projects, conducted this year and set to deliver cost savings in 2023 and beyond, we have the following highlights:
- A valvetrain components supplier saw an annual saving of $750k (5%) through APD’s stampings market test. We reached out to 24 suppliers, and 6 provided competitive quotes.
- A specialty vehicle manufacturer achieved annual savings of $525k (8%) on same manufacturer/same part number items by replacing their MRO supplier through APD’s strategic sourcing project. Further savings of 2% have been identified using equivalent items from different manufacturers, to be implemented by the end of 2023.
- A construction equipment manufacturer enjoyed an annual saving of $315k (15%) through APD’s market test of wire harness suppliers. They plan to source additional parts at a similar savings rate.
- An automotive supplier partnered with APD for a strategic sourcing project to replace their corrugated packaging suppliers, resulting in $1.2M in savings (15%). Another automotive supplier working with APD on corrugated packaging has identified a 30% savings on their smaller ($1.2M) spend.
Want to learn the critical success factors for strategic sourcing projects that deliver results? Watch the Delivering on Strategic Sourcing webinar