100% remote delivery of supply chain improvements helped a chemicals carve-out overcome the challenges of a high demand/declining supply environment
This story is for executives who:
- Are operating in an increased demand/declining supply environment
- Need to secure savings and overcome supply challenges but lack the procurement maturity to act quickly
- Want to quickly implement a standardized, sustainable sourcing and negotiation process
The Challenge
Having previously helped this PE client successfully stand up other portfolio companies post carve-out, we were approached to help increase the exit valuation of an asset in the specialty chemicals sector.
The company, which produces chemicals used in the cleaning and personal care industry, had been positively impacted by COVID-19. However, high demand combined with a global shortage in raw materials had quickly overwhelmed the immature procurement organization.
To keep up with the sharp increase in front-end sales volume and overcome supply shortages, the company needed Maine Pointe’s help to shift from a transactional to a strategic procurement approach.
Developing strategic relationships to secure supply
Procurement’s policy of spot buying may have been effective in the past. However, when COVID-19 hit, an increased demand/ declining supply environment, meant they risked being left high and dry as suppliers focused on companies with formal agreements. To get this under control, and significantly decrease transaction volumes, Maine Pointe needed to help the business move to strategic, supplier agreement-based procurement.
Delivering remotely, Maine Pointe’s SMEs worked closely with the company’s executive team to:
- Lead them through the negotiations and set up formal supply agreements, generating 9% in EBITDA improvement over an 18-week period
- Seek out new domestic and overseas suppliers which procurement was previously unaware of
- Map the existing supplier base back to producers to investigate the availability of additional raw material
- Train the global procurement organization in a standardized strategic sourcing and negotiation process to secure additional supply of key raw materials and leverage the value of supply agreements which include volume incentive rewards
- Develop and install a tailored management operating system for value tracking, and monitoring, including price management mechanisms
The improvement of procurement in terms of cost structures and agreements led to an annualized improvement of 6% within 18 weeks.
The Results
Working closely with the PE firm and company leadership, Maine Pointe’s remote delivery model and accelerated approach resulted in:
- Improved EBITDA by 9%
- Delivered 6% annualized savings within 18 weeks
- Trained global procurement organization in a standardized strategic sourcing &
negotiation process - Developed and installed a tailored MOS
- Achieved a 4:1 engagement ROI
Lessons learned for other executives
- You can standardize processes and increase the maturity of your supply chain in a relatively short space of time
- Complex supplier negotiations can be completed quickly and efficiently using a remote delivery model
- Even in a high-demand environment, it is possible to take advantage of changing supplier dynamics to rebalance the supply base and improve performance