|
CASE STUDY SUMMARY
Gibson Helps Client Realize Annual Savings in Excess of $50 Million and Total Project Savings in Excess of $250 Million
- Gibson team established clear metrics for client's organization for professional development and measurement
|
Industry Industrial Products
|
Issue: Rising transportation costs due to demands of an increasingly service-oriented customer base.
Result:
The client realized more than $28 million in savings.
Client Background:With over $425 million in annual revenue, our client is a worldwide leader in large natural gas compression engines. The Company manufactures and markets original equipment and aftermarket parts and services for use in the Gas Compression and Power Generation markets. Their products are used around the world in extreme climate conditions and remote areas; thus their customers place a high demand on quality and reliability. In order to be more competitive, the client sought to reduce cost of goods sold through operational improvements and strategic sourcing of materials and services.
Evaluation:With a customer base dominated by “big box” retailers, our client was expected to deliver year-over-year annual price reductions. They had several joint ventures established in Taiwan and China for finished goods, but a global sourcing strategy for components was not as developed. Gibson analyzed 6 manufacturing sites and over $600 MM in annual expenditures to identify opportunity areas. Preliminary savings estimates ranged from $11.0 to $17.0 MM.
Approach:Gibson completed a strategic sourcing and outsourcing project that focused on 25 spend categories over the course of 2 years. Gibson trained and worked side-by-side with over 75 client professionals to strategically source all 25 categories and perform a make vs. buy analysis on 5 of the 25 categories. In summary, this client negotiated and site visited 150 suppliers from 11 countries.
Results:
The project generated over $28 MM in realized cost savings and over a $0.16 annual earnings/share improvement. Many international suppliers were selected, including two Chinese suppliers for not only components, but also for value-add operations as part of a “buy” decision. Client reduced supply base by 22% and improved supplier on-time delivery by 30% and improved quality by 15%.