Global Strategic Sourcing Study

Power Tool Manufacturer

Client Background

Leading manufacturer of professional power tools and is a $1.1 billion group of a $3 billion company. This company has four manufacturing plants in the U.S., a joint venture in Asia, one plant in Germany and two major distribution centers in North America.

Results at a Glance

$ 0 MM
in savings
$0. 0
annual earnings per share improvement
0 %
reduced supply base
0 %
improved supplier on-time delivery
0 %
improved quality

Challenge

Rising transportation costs due to demands of an increasingly service-oriented customer base.

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 direct 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 supplies from 11 countries.

Results

The project generated over $28 MM in realized cost savings from Phase I (cumulative project savings from all Phases was over $128 MM annually) and over a $0.16 annual earnings per share improvement. Many international suppliers were selected, including 2 Chinese suppliers for not only components, but also for value-add operations as part of a “buy” decision. Client reduced supply base by 42% and improved supplier on-time delivery by 70% and improved Quality by 30%.

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