strategic sourcing

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Home | Results | Case Studies | Underground Mining Equipment

Underground Mining Equipment
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CASE STUDY SUMMARY
Client Realized More than $28 Million in Savings

  • Gibson helped engineer support for new product development and product rationalization
Industry
Industrial Products

Lead Partner(s)

Issue: Client sought an opportunity to improve overall operating results and increase earnings per share. As such, they elected to utilize Strategic Sourcing as a mechanism to gain a sustainable competitive advantage.

Result: Client realized annual savings in excess of $21 million and total project savings in excess of $105 million.

Client Background:

With over $1 billion in annual revenue, our client is a worldwide leader in high-productivity mining solutions. The Company manufactures and markets original equipment and aftermarket parts and services for both the underground and above-ground mining industries and certain industrial applications. Their products and related services are used extensively for the mining of coal, copper, iron ore, oil sands, gold and other mineral resources. 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:

The Gibson team gathered and analyzed the client’s supply base and annual material and service spends. Potential savings opportunities were uncovered and various technical and organizational issues impeding cost-effective performance were identified.

  • Conducted interviews with cross-functional and cross-divisional professionals and facilities management teams and gathered extensive data to benchmark costs and processes.
  • Identified opportunities to work with “Global” suppliers to obtain tremendous operational benefits and lower overall cost.
  • Recognized need for skill-based training, development of a project work plan and timeline to realize savings.
  • Performed a detailed end-to-end supply chain diagnostic to map out current state.

Approach:

To take advantage of cost-savings opportunities, Gibson implemented a Strategic Sourcing project targeting eight specific categories, including Castings, Forgings, Metals (Steel), Electrical Components, MRO & Production Supplies, Transportation, Fabrications, and Machined Parts & Gears.

  • Gathered and outlined data requirements.
  • Revised sourcing department organizational structure and created job descriptions and qualifications consistent with those considered “Best in Class”.
  • Trained client teams in Methodology, Executive Communications, Negotiations, Project Planning/Management & Execution and Alliance Management to ensure sustainability of improvements.
  • Invested significant time and resources to thoroughly understand the industry and the commodities marketplace.
  • Defined and carefully developed each negotiable issue for effective/efficient negotiations.
  • Challenged client to truly consider “Global” suppliers and not necessarily rely on those suppliers within a 150 mile radius of their manufacturing facility.

Results:

Cost savings were achieved by reducing the client’s supply base and significantly improving alliance management. Ongoing cost reductions will be sustained by new organizational structure, which has increased the awareness of sourcing issues among management.

  • Realized over $21 million in savings annually.
  • Reduced supply base by 65%.
  • Established consistent process across all divisions and disciplines.
  • Established clear metrics to evaluate supplier alliances
  • o Mutual development of KPI’s for monthly reporting and measurement.
  • Established clear metrics for client’s organization for professional development and measurement.
  • Improved cash flows by extending payment terms by 45 – 90 days. Also obtained attractive discount terms for early payment.
  • Significantly reduced inventory turns by implementing inventory management programs such as consignment, JIT, Kanban, safety stock, VMI programs, etc…
  • Offered tiered Volume Rebates.
  • Established Commodity Base Price Stability.
  • Offered dedicated manufacturing capacity.
  • Commodity Base Price Stability.
  • Established On-Time Delivery metrics of >95%.
  • Engineering support for New Product Development as well as Product Rationalization.







 


Supply Chain, Strategic Sourcing, Goals, Success








 
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