Situation
This client designs and installs HVAC systems for large commercial buildings. Global competition and economic slowdown, driving prices down, required urgent cost reductions.
Actuators were identified as one of the purchasing categories with a large opportunity for cost and inventory reduction. The client engaged us to design and implement supply chain integration for its Spring Return & Non-Spring Return Actuators.
Solution
Focusing on standard Actuator products, which was the vast majority of the spend, we identified and qualified the supply base globally. As part of the key selection criteria, suppliers were required to hold inventory at their own cost and provide frequent deliveries. Both OEM and Distributors were invited to compete for business. Our competitive selection process used a reverse auction.
Results
We consolidated the business with one major supplier. this consolidation resulted in 41% annualized savings. related improvements included the alignment of delivery frequency with the production schedule and inventory reduced by 70%.