2022 is starting off with a significant Covid surge, once again impacting the daily routines of many. Time will tell how badly manufacturing and logistics will be affected, and how much delay this will add to supply chains recovery from the prolonged disruptions of 2020/2021.
Purchasing organizations have been consumed by the urgent demands of ensuring supply to keep factories running. For most, strategic cost savings has been deferred along with everything else that doesn’t get “hair on fire” attention.
Despite the challenges, some purchasing organizations are keeping their savings pipelines full. Manufacturing executives have shared their successes in APD roundtable discussions. The focus of these roundtables is peer education/sharing with participants connecting with other purchasing, finance, and operations executives to share best practices.
Here are some of the savings programs executives identified in the discussions:
- CEO of an automotive display supplier shared that they are working to consolidate resin materials across their North American and European facilities to achieve lower costs through increased volumes.
- Chief Procurement Officer at a global industrial technology company shared that their team has launched several immediate savings projects as part of APD’s Cost Management Certification course that buyers are attending. Immediate savings will total over $1.4M, with other longer-term projects launching in parallel.
- Procurement Director for a household products manufacturer shared that they have focused on Value Engineering audits with suppliers to identify cost savings.
- Global VAVE Director for an electronics manufacturer shared their success driving costs down by converting metal cast components to engineered resins. They also highlighted that they use a 2-pronged approach to identifying Value Analysis and Value Engineering projects:
- Operating Profits (OP) workshops for internal improvements. For each commodity, they host a global cross-functional call every 2-3 weeks to brainstorm opportunities.
- Global best practices checklists. For key commodities, they apply a checklist of cost drivers to systematically generate cost improvement ideas.
- Director of Strategic Sourcing for a plastic parts manufacturer shared that their sourcing team is involved at the beginning of new product development to ensure that competitively priced resins are specified.
- Vice President of Global Supply Chain from a manufacturer of heat transfer products shared that they are in the midst of a near-shoring initiative, focusing on Mexico for North America and Eastern European countries for Europe. Their expectation is to drive down total cost of ownership through reduced freight and tariffs, without much expectation for reducing direct material costs.
- President of a plastic bottle manufacturer shared that they were able to consolidate major suppliers from 4 to 2 and achieve price decreases.
- Commodity Purchasing Director for an automotive interiors supplier shared that new business awards have been the best lever for achieving cost savings in this environment. In addition, they have had success switching plastic component top lower cost suppliers without having to share the savings with their customers.
- Purchasing Director for an automotive supplier of HVAC and fluid handling systems shared that they are currently evaluating potential savings from consolidating management of freight and logistics, which is currently managed independently at plants.