Mission: Build a new member’s first company-wide category contract.
The new member is moving from a facility level sourcing focus to a centralized category management approach. They are aiming to decrease the many suppliers they have for each sub-category.
With a focus on the MRO (Maintenance, Repair and Operating supplies) category, the product sub-categories were immense. These include, facilities supplies, bearings and power transmission, industrial supplies, lab supplies and safety supplies. As you can imagine, with so many sub-categories, a company can easily attract more suppliers than they need.
Filtering through the new member’s data, CoVest extracted all the spend information based on transactions from the previous year. CoVest then parsed the data into logical buckets and identified which supplier was best positioned to supply those items.
Working with the member to pull item descriptions and information, CoVest benchmarked the items category by category and worked with its supplier partners to conduct site visits and engage local stakeholders.
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The project generated over $2.5 million in year over year product cost savings for the member, in addition to paving the way for the future product consolidation savings, and providing a robust data set for future product pricing negotiations with manufacturers.
As a part of the process, the company reduced their indirect supplier count tremendously. The member originally began with as many as dozens of suppliers in a category, but after CoVest’s aid, the member went down to a key supplier per category.
Click the link below to view an in-depth PDF of the case study. There you will find data on the MRO spend breakdown and the spend and savings profile.