Time to Take a Closer Look at Indirect Savings
A Buyer’s Market for Indirect?
This month’s Manufacturing ISM report brings good news for North American buyers of indirect spend. Corrugate, pallets, and freight are all listed in the Commodities Down in Price, with no indirect commodities listed in the Commodities Up in Price or the Commodities in Short Supply listings.
This aligns with our recent experience. Already this year we’ve helped clients complete two projects that delivered excellent saving on indirect spend (see below). Indirect spend is a broad description – it can be helpful to think of five major buckets for manufacturers:
- MRO – Maintenance/repair items and factory supplies
- Consumables – Packaging, lubricants, perishable tooling
- Facility services – Cleaning, uniforms, facility improvements
- Logistics – Freight and warehousing
- Corporate services – Marketing, IT, consulting
MRO Savings Example
We’re helping a commercial vehicle manufacturer implement $600k (8%) annual savings on MRO, replacing their supplier who was not providing the coverage, information, or services needed by the plants. Our team identified a market basket representing 70% of their MRO spend, conducted a market test with nine suppliers, and helped negotiate the commercial agreement in just 90 days.
Corrugated Packaging Savings Example
We helped an automotive exteriors supplier implement $575k (17%) annual savings on their highest volume corrugated packaging, replacing one supplier who was not meeting the needs of the plants and keeping another (with negotiated savings) who had been a reliable supplier partner. Our team provided the expertise to quickly market test their top 40% of corrugated spend with six suppliers.
Want to learn more about how to save on indirect spend? Watch the on-demand webinar that describes the challenges – and proven solutions – for achieving savings on MRO, packaging, and freight.