Discussion Highlights: Driving Savings on Indirect and Freight

July 12, 2022 Strategic Cost Reduction Roundtable

The roundtable theme was best practices for reducing costs on indirect spend and freight/logistics. Roundtable participants shared their experience, including what is working to drive savings and categories they recommend focusing on, followed by a short case study presentation on how APD assisted a valvetrain components manufacturer achieve 11% net savings on MRO and 8% savings on domestic freight.

Highlights of the roundtable discussion are summarized below.

  • CEO of a supplier of high durability labels supplier for heavy duty trucks shared that they have a customs and logistics analyst that focuses on finding freight savings. In addition, they are working to add a facility in Texas to supply their U.S. customers, enabling them to more efficiently use Mexican suppliers.
    • They’ve been asked by customers to move their supply base from SE Asian to Mexico
  • President of an automotive interiors supplier shared that they have found returnable packaging to be a reliable source of savings – while the savings are modest, they have many projects that can be affected. They noted that their plants in North America, Europe, and Asia all have regional supply chains, reducing costs of routing returnable packaging to manufacturing plants.
  • Associate Commodity Director of an audio equipment manufacturer shared that they have entered into a shorter-term utilities contract to enable them to be able to take advantage of decreasing costs in the future. They mentioned that their industry has been heavily affected by chip shortages, and they are now approaching air freight shipping more strategically (accepting longer shipment times to avoid the extra costs when customers are allowing delays). They also shared that they are trying to emphasize regional supply chains for their Mexico and China manufacturing facilities.
  • President of an automotive springs and bushings supplier shared that they have focused on finding savings on oil and fluids, and if customers do not approve substitutes, use that as leverage to get cost increases on their products. They also share that they are moving their in-house tooling production from U.S. facilities to their Mexican locations, and rea looking to move warehouse locations to optimize internal shipping costs.
  • Vice President of Procurement for a hatchery equipment manufacturer shared that they are focusing on localizing their supply chain, particularly in Mexico and Brazil. They use multiple freight forwarders to optimize shipping costs (commented that they do not use a 3PL because they need to control their shipping to 150 different countries), working with customers to consolidate shipments where possible.