A leading producer of professional power tools, this $1.1 billion division is part of a $3 billion corporation. The company operates four manufacturing plants in the U.S., a joint venture in Asia, one facility in Germany, and two primary distribution centers in North America.
Increasing transportation expenses driven by the needs of a more service-focused customer base.
Serving primarily “big box” retailers, the client faced pressure to deliver consistent annual price cuts. While they had joint ventures in Taiwan and China for finished goods, their global sourcing strategy for components was less mature. LVP examined six manufacturing sites and over $600 million in yearly spending to pinpoint potential savings, estimating preliminary reductions between $11.0 and $17.0 million.
LVP carried out a strategic sourcing and outsourcing initiative targeting 25 direct spend categories during a 2-year period. They trained and collaborated closely with more than 75 client professionals to strategically source all 25 categories and conducted a make-versus-buy analysis on 5 of them. Overall, this client negotiated with and visited 150 suppliers across 11 countries.
The project achieved more than $28 million in cost savings during Phase I (with total annual savings from all phases exceeding $128 million) and increased annual earnings per share by over $0.16. Several international suppliers were chosen, including two Chinese companies for both components and value-added services as part of the “buy” decision. The client reduced their supply base by 42%, boosted on-time delivery from suppliers by 70%, and enhanced quality by 30%.
