Eroding Margins
Potential savings in purchased materials.
Case Studies
Business Issue
The new CEO of a design-to-order higher-technology company has been facing eroding margins because of intense pressure on the bottom-lines of its customers. The new CEO needed a quick assessment of potential savings in his purchased materials and specific recommendations for implementation.
Approach Used
Flow consultants began with a quick and hard-hitting analysis of the company’s total purchasing expenditures. They also interviewed key personnel in Engineering, Purchasing and Finance to identify process issues and attendant strengths and weaknesses. Clear issues in long-term supplier relationships with no cost reductions and Engineering/supplier-price negotiations were identified.
Results
Flow Consulting identified a 10 percent cost savings in future cost-downs by working with the company’s top 15 suppliers. In addition, at least a 20 percent reduction in future costs in new components was identified by putting in place processes to have Engineering involve Purchasing in all phases of supplier-price negotiations. Also, Engineering and Purchasing employees are being trained in Strategic Sourcing tactics and cost avoidance.