This multi-national electronics company needed a way to get the cost of parts and materials throughout its' extended value chain back under control. While the transition to manufacturing outsourcing had allowed our client to remain competitive on manufacturing costs, the resulting loss in control of part and material costs throughout their supply chain was a cause for concern.
There were also operational issues to consider. Many part categories experienced periods of tight demand, the most renowned of these categories being computer memory. Also, any increase in commodity prices made it difficult for part suppliers to manufacture parts at a profit, leading to a huge administrative activity in renegotiating parts contracts to accomodate this.
We analyzed spend and market information, and developed recommendations for the manner by which they should manage suppliers on a category by category basis. This led to a consolidation of procurement responsibilities to the company in some categories, and a delegation of purchasing responsibility to contract manufacturers where they were stronger.
"(This initiative) brought us sustainable step reductions in our costs for direct parts and materials"
As a result, many categories experienced a reduction in the net landed price of goods purchased, with a benefit range of 4 to 14%.
This intitiative presented a few operational challenges. It required that we structure purchasing agreements in the correct manner to support import/export regulations as well as tax rules. We also needed to develop a way to protect proprietary information while delegating procurement activities across the supply chain.
We performed this work in conjunction with a global consulting and technology services provider.
Consumer Electronics Company
Direct Procurement Redesign