Cost Reduction & Nearshoring – Strategic Sourcing

Our focus is improving bottom-line financial results through the implementation of proven procurement processes and sourcing strategies. Clients in industries ranging from automotive to building materials to commercial truck have achieved significant, durable results from our unique approach to supply chain consulting. 

Fast-Track Savings

Quickly Identify and Implement Six Figure Cost Reductions

Fast-Track Savings is APD’s proven procurement process for reducing costs on existing spend. This unique approach shortcuts the strategic sourcing process by leveraging the expertise of knowledgeable commodity specialists who can quickly determine where untapped savings can be quickly implemented. 

Direct materials and indirect spend categories with $2M – $20M spend under management reliably results in $200K+ cost reductions in as little as 14 weeks.

Fast-Track Savings projects follow a straightforward process: 
  • A rapid commodity opportunity assessment so you know where to focus efforts and how much savings can be expected in the short term. 
  • A targeted savings strategy that energizes leadership to take action and reduces change management risks. 
  • A market test of confirmed capable suppliers to drive maximum savings. 
  • Quick cost reductions and an action plan for further reducing costs with improved sourcing strategies.

$1B Commercial Truck Manufacturer Saves $560K on MRO 

The largest division of a commercial truck manufacturer was frustrated after experiencing poor service and increasing costs from its primary MRO provider. APD interviewed 38 stakeholders within the plants and identified the critical information needed to market test 70% of the $6.5M annual MRO spend. A new MRO provider was selected that could deliver 8.5% savings on the MRO spend while improving service levels to match the needs of planning, EHS, finance, operations, and maintenance stakeholders. Savings began 13 weeks after the project kick-off.   

$250M Plastics Packaging Manufacturer Saves $485k on Resins 

A manufacturer of plastics packaging was reliant on a sole source of a specialty PET material that had been raising prices, taking advantage of a North American supply shortage. APD resin experts conducted a global capacity study and identified the source and timing of new capacity not subject to anti-dumping duties. The client and APD used this intelligence to negotiate a cost reduction with the current supplier that resulted in an immediate $485k annual savings.   

“. . .  a grand slam home run . . .It was really a good experience and a good savings for us working with APD” – Read the full quote from the VP of Purchasing and Supply Chain here 

$1B Automotive Supplier Saves $390k on Corrugated Packaging 

A supplier of electronics modules for the automotive industry engaged APD to conduct a project to consolidate their sourcing of corrugated packaging for US and Mexican plants.  Nine potential suppliers were identified to participate in a multi-round market test along with three current suppliers.  $390k annual savings on the $2.2M spend making up the market basket was implemented fairly quickly, with additional savings on the $1.1M tail spend to follow. 

$400M Automotive Supplier Saves $360k on Resins 

A supplier of automotive interiors needed to reduce material costs to maintain competitiveness.  APD resin experts identified 24 specific resins supplied by 5 manufacturers and compounders to focus on based on volumes, program lifecycle, and potential substitution.  First, alternative materials and suppliers were identified and competitive pricing secured.  Next, negotiations with current suppliers achieved 4.5% savings on the $8M annual spend for the target materials, implemented within 16 weeks. 

“. . .we saved a lot of money . . . Excellent ROI, for sure” – Read the full quote from the Director of Commercial Finance and Purchasing here 

$150M Valvetrain Component Suppliers Saves $220K on Domestic Freight 

A supplier to automotive and truck OEMs was under pressure to reduce costs. One area of focus was their 3PL that handled domestic freight  (LTL and Truckload) due to poor on-time delivery rates and a lack of real-time information on LTL shipments.  APD logistics experts interviewed stakeholders to understand the needs and pain points throughout the organization and identified multiple capable 3PLs to market test. A 3PL was selected that provided greater service levels and the real-time information that was missing, resulting in an 8% savings on $3M annual domestic freight spend within 14 weeks. 

“A lot of good value, the ROI is off the chart. I mean, it’s just really substantial, and it comes right to our bottom line” – Read the full quote from the company President here

Fast-Track Sourcing

Quickly Identify Capable Suppliers to Support North American Manufacturing

Fast-Track Sourcing is APD’s proven process to help manufacturers quickly identify capable suppliers.  Often used for regionalization initiatives to nearshore the supply base to the U.S., Mexico, or Canada.

Leveraging our experienced purchasing professionals in both the U.S. and Mexico, clients ranging from agriculture equipment producers to automotive suppliers to electrical component manufacturers have identified capable and cost competitive suppliers to support their North American manufacturing operations. 

Supplier vetting includes multi-round interviews with potential suppliers against an Ideal Supplier Profile developed with the client for their specific needs, for example supplier manufacturing locations, open capacity, manufacturing capabilities, materials used, lead times, and ability to communicate in English.  This proven process supports client cost reduction efforts, strategic sourcing, and global sourcing strategies. 

Typically, 5-7 suppliers are vetted per commodity, although this is flexible depending on client needs.

Examples of industries and commodities served since 2023 include: 
  • Aluminum castings for a brake system supplier 
  • Aluminum die castings for an audio equipment manufacturer 
  • Aluminum extrusions for a light truck aftermarket supplier 
  • Coatings for an automotive supplier 
  • Copper tubes for a heat exchanger manufacturer 
  • Fabrications for a commercial truck manufacturer 
  • Forgings for an industrial equipment manufacturer 
  • Heavy weldments for an agriculture equipment producer 
  • Injection moldings for an industrial sensors manufacturer 
  • Insert moldings for an automotive supplier 
  • Machined parts for a motorcycle supplier 
  • Metal hardware for a residential shower door supplier 
  • Stampings for an automotive supplier 
  • Turned parts for an aviation supplier

$2B Brake System Manufacturer  

A supplier to automotive and commercial vehicle OEMs needed to nearshore metal parts to reduce shipping costs associated with importing from Asian suppliers and increase North American content for USMCA requirements.  They engaged APD to assist with identifying capable suppliers for low volume/high mix aluminum castings, stampings, and forgings. 

  • For aluminum castings, APD identified 7 suppliers that matched with 22 specific attributes for an Ideal Supplier including production capabilities and available capacity. 
  • For stampings, APD identified 7 suppliers that matched with 19 specific attributes for an Ideal Supplier including production capabilities and available capacity. 
  • For forgings, APD identified 4 suppliers that matched with 19 specific attributes for an Ideal Supplier including production capabilities and available capacity. 

Following the supplier identification and vetting steps, the client engaged APD to conduct site visits to 6 aluminum casting suppliers.   Based on the findings, APD was able to recommend 4 suppliers as best qualified for the client’s current and future production needs. 

$500M Construction and Agriculture Machinery Manufacturer  

The North American division of a European-headquartered company was awarded business to supply a high-volume product to an agricultural machinery OEM.  They had to establish a new supply base due to the volumes and were targeting Mexico to achieve cost targets.  Rather than hiring a buyer in Mexico to support these efforts, they engaged APD to assist with target commodities including weldments,  plastic injection parts, and wire harnesses: 

  • For weldments, APD identified 6 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.  APD conducted a multi-round RFQ with three suppliers selected by the client. 
  • For injection molded parts, APD identified 6 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.    APD conducted a multi-round RFQ with 6 suppliers selected by the client. 
  • For wire harnesses, APD identified 7 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.    APD conducted a multi-round RFQ with 5 suppliers selected by the client. 

$400M Automotive Supplier 

A supplier of electro-mechanical control systems was introducing numerous new products and needed to identify suppliers for several newly awarded programs.  They targeted Mexico due to challenges with their Asian suppliers and the need to increase North American content for USMCA requirements.  They engaged APD to assist with identifying supplier for thermoplastics, turned parts, insert moldings, and DC motors: 

  • For thermoplastics, APD identified 4 suppliers that matched with 17 specific attributes for an Ideal Supplier including production capabilities and available capacity.  APD conducted an RFQ and identified two that were competitive on costs. 
  • For turned parts, APD identified 3 suppliers that matched with 15 specific attributes for an Ideal Supplier including production capabilities and available capacity.  APD conducted an RFQ and identified two that were competitive on costs. 
  • For insert moldings, APD identified 3 suppliers that matched with 15 specific attributes for an Ideal Supplier including production capabilities and available capacity.   
  • For DC motors, APD identified 3 suppliers that matched with 14 specific attributes for an Ideal Supplier including production capabilities and available capacity.   

$2B Building Materials Manufacturer 

A manufacturer of architectural hardware and bathroom shower components needed to nearshore a variety of parts to reduce shipping and tariff costs associated with importing from Asian suppliers.  They engaged APD to assist with identifying supplier for six commodities: 

  • For aluminum tubular parts, APD identified 4 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.   
  • For stainless steel fabricated or cast parts, APD identified 2 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.   
  • For brass tubular parts, APD identified 3 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.   
  • For brass cast parts, APD identified 5 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.   
  • For EPDM gaskets, APD identified 3 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.   
  • For aluminum extrusions, APD identified 8 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.   

$21B Electrical and Industrial Power Management Company 

A global manufacturer wanted to increase its access to Mexican turned parts suppliers for three divisions.  They engaged APD to identify and vet potential suppliers in order to have 15 total turned parts suppliers that could support at least one division: 

  • For the automotive division, APD identified 11 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.   
  • For the aerospace division, APD identified 2 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.   
  • For the electrical division, APD identified 7 suppliers that matched with specific attributes for an Ideal Supplier including production capabilities and available capacity.

Strategic Sourcing

Deliver Cost Savings and a Strategically Aligned Supply Base

Strategic sourcing is a well-established procurement process to deliver durable cost reduction through re-alignment of the supply base.  Emphasis is on translating the organization’s strategy and stakeholder goals to commodity objectives that drive sourcing. APD brings commodity specialists and cost engineering experts together to implement a value-adding, sustainable supply strategy for a target commodity. 

Direct materials and indirect procurement categories with $10M+ spend under management are the optimum candidates for strategic sourcing. Typically, strategic sourcing is the preferred approach when a company is consolidating sourcing suppliers, pursuing global sourcing, or evaluating make vs. buy. Nearshoring is sometimes an important sourcing strategy for achieving strategic sourcing goals.

Strategic Sourcing projects follow a straightforward process: 
  • Segment the spend and interview stakeholders to develop commodity management objectives 
  • Identify suppliers with capabilities and capacity to leverage across the organization 
  • Conduct a multi-round market test to select suppliers that fulfil organizational needs while delivering cost savings 
  • Develop an action plan for sourcing strategies (including resourcing) and negotiating cost reductions with current suppliers

Need to quickly implement savings on exist spend? Explore Fast-Track Savings – Advanced Purchasing Dynamics

$2B Insulation and Commercial Roofing Manufacturer Identifies $5.2M Savings on Coiled Aluminum and Stainless Steel 

A $2B manufacturer had acquired 3 plants that consumed $32M annually of coiled aluminum and stainless steel, a commodity new to the company. They had been adding suppliers to deal with post-COVID supply shortages. They engaged APD to conduct a strategic sourcing project to reduce costs by consolidating the supply base. Two of the plants were in Canada and one was in the U.S., subject to tariffs from low cost countries. 

APD’s metals commodity expert interviewed stakeholders from the plants and 9 current suppliers to understand the service levels currently provided and unmet stakeholder needs. They developed an Ideal Supplier Profile and evaluated the current suppliers and 12 potential suppliers to identify those that had the capability to fulfill current and future needs. After conducting a multi-round market test, they recommended a sourcing strategy for each of the 3 facilities across the two materials, resulting in a projected 16% savings. 

$1B Commercial Truck Manufacturer Identifies $1.8M Savings on Wire Harnesses 

A commercial truck manufacturer had been sourcing wire harnesses at the division level, and several recent acquisitions resulted in an opportunity to consolidate sourcing across 5 divisions. They engaged APD to conduct a strategic sourcing project to identify suppliers that could fulfill the needs of multiple divisions and reduce costs on the $8M annual wire harness spend. At the time, they had 14 active wire harness suppliers, with needing to be replaced due to financial issues and/or supply performance. 

APD’s consulting and cost engineering team segmented the wire harness spend to identify sub-commodities with different requirements, for example short design-to-build times and the capability to provide CAD drawings. They identified and evaluated 25 current and potential suppliers against an Ideal Supplier Profile and conducted a multi-round market test with the best 12, resulting in 5 suppliers that were the most capable and cost competitive.  Quotes from these suppliers represented a 23% cost reduction.   

Delivery Van Manufacturer Sources New Electric Vehicle with APD Assistance 

A legacy delivery van manufacturer designed an all-electric model, unique from its existing designs. They needed to quickly source all systems and components to hit prototype production schedule commitments. Realizing they needed experienced sourcing assistance familiar with the commercial vehicle and EV supply bases, they engaged APD to identify sources and obtain preliminary costs for: 

  • Aluminum extrusions 
  • Side and partition doors 
  • Stair coverings 
  • Stampings 
  • Steel bumpers 
  • Switches 
  • Weather seals 
  • Windshields and windows 
  • Wiper systems 

$150M Valvetrain Component Suppliers Identifies $2M Savings on Stampings 

A supplier to automotive and truck OEMs was under pressure to improve profitability. Their primary manufacturing processes were stamping and machining, and they decided to engage APD to conduct a make vs. buy study for the product lines that made up most of their volume. 

APD interviewed stakeholders to develop an Ideal Supplier Profile for each commodity. After vetting 43 potential suppliers against the criteria in the appropriate Ideal Supplier Profile, 19 were invited to quote. The best cost supplier in stampings generated a 15% savings, while all machining suppliers quoted significantly above the “make” cost (the company was able to use this finding to support future price negotiations with their customers).  

$4B Electric Steering Supplier Identifies $1.4M Savings on MRO Items  

An automotive supplier was using a 3rd-party MRO commodity manager to manage the buying of of $25M/year of MRO items to support a centralized MRO warehouse serving six production facilities. They were unhappy with the MRO commodity manager due to increasing costs and inventory levels, as well as service issues. They engaged APD to identify sources for directly purchasing the items as well as potential substitutes to further reduce costs. 

APD interviewed stakeholders to understand the current pain points and unmet needs with the 3rd-party MRO commodity manager and in parallel, developed a market basket with over 3,000 items representing 14 MRO categories. APD identified 33 suppliers for a multi-round market test and based on the results, recommended sourcing for each of the 14 categories, as well as providing a roadmap for investigating substitute items for low difficulty/higher savings potential categories.

Cost Engineering

Supplier prices are the result of the underlying cost structures for producing the goods and services AND the buyers understanding of those cost structures. Our work confirms this; buyers who understand and manage the cost drivers instead of focusing solely on price achieve lower prices.

There is no one size fits all approach for obtaining this cost knowledge and achieving the lowest possible pricing. That is why our cost engineering group employs a number of techniques that are applied to the purchases where they provide the best fit for understanding and cost reduction.

All of our approaches include go forward cost models that enable the purchasing team to sustain and build upon the savings that are achieved.

The major cost models used by APD are: Open Book Cost Modeling, Knowledge Based Market Testing, Benchmark and Teardown Analysis, and Attribute Modeling.

Open Book Cost Modeling

The truth can be found on suppliers’ shop floors. Our open Book Cost Modeling starts there with our cost engineers mapping labor, overhead and material costs to the production process to develop highly accurate Open Book Cost Models. Supplier pricing is efficiently validated to the models utilizing ProcureForce, our proprietary cost management software. This enables purchasing to:

  • Learn who the low cost suppliers truly are and funnel business to them.
  • Go forward with fewer suppliers.
  • Source without completed designs from engineering enabling engineering to design to cost.

Once cost models are developed, buyers can easily compare supplier quotes to the “should be cost models” using ProcureForce.

Knowledge Based Market Testing

One step away from the shop floor is our Knowledge Based Market Testing – powered by ProcureForce. Using this process our engineers develop quotation frameworks that obtain critical information on the suppliers manufacturing processes and costs. ProcureForce enables the engineers to efficiently analyze and optimize the quotations to develop knowledge based cost models that approach the level of accuracy of True Cost Models.

Benchmark and Teardown Analysis

Our experience has led us to almost 1,000 supplier shop floors providing us with unparalleled understanding of manufacturing cost benchmarks. Combining these benchmarks with our teardown analysis techniques enables us to analyze one part or a multitude of parts and accurately estimate savings potential.

Attribute Modeling

Savings opportunities can be identified and cost control can happen even in the absence of detailed cost breakdowns and supplier shop floor cost models. Attribute modeling allow cost engineers to look at a large number of parts at once to identify:

  • Components that are out of step on pricing and provide savings opportunity.
  • Supplier to supplier pricing competitiveness.
  • Design characteristics that are driving pricing

Case Study- Open Book Cost Modeling

A manufacturing client was looking to outsource its stamping operations in order to simplify its manufacturing footprint. However, quotations from prospective suppliers indicated limited savings opportunities. Within days, APD had identified a potential savings of 20% or $600k using our existing stamping Open Book Cost Model. Since our models are based upon actual costs from supplier shop floors, we were able to assist the client in sourcing the business and capturing all of the 20% savings.

Case Study- Strategic Cost Reduction

APD was engaged by a client who was struggling implementing a 3rd Party Integrated Supply Model for MRO. After 4 years of effort only 20% of their MRO spend was being managed by the model. APD successfully reworked program scope, metrics and launch processes. The results? In 10 months spend under management had increased to 85%, annualized savings for the program tripled and the client was able to substantially reduce its MRO procurement headcount.

Case Study- Transitional Purchasing Strategies

A company wanted to improve the bottom line performance on a recent $39 mil in sales acquisition. APD provided an on-sight team of purchasing professionals that quickly identified and implemented over $1 mil of savings giving the client a 4:1 ROI.