Reaching refinance and exit goals by reducing costs and optimizing the supply chain

Improved EBITDA by 10%, backed by analysis, tools, and training for sustainable procurement savings

This story is for CEOs and PE firms who:

1. Anticipate exiting and want to improve the valuation of the company
2. Seem to have reached the maximum reduction in procurement costs 
3. Have been accepting poor supplier performance due to a perceived lack of alternatives

The challenge

A company that manufactures various adhesive products used in the automotive, medical, and consumer industries, among others, had a critical need to reduce procurement costs. Because the company supplied industries with very rigid product standards, they found changing suppliers difficult: the qualification cycle, especially for medical applications, was extremely long and involved. Because suppliers knew that the intense qualification process limited the company’s options, they were reluctant to partner with the company to drive down prices. The company was therefore skeptical when an analysis by  Maine Pointe identified far more potential savings than they had originally projected.

 Maine Pointe:

• Developed and implemented tailored negotiation strategies for the company’s unique spend profile 
• Divided prices into index price, market price, and adder to demonstrate the control the company had over the adder during negotiations 
• Created a new request-for-proposal (RFP) template, which leveraged index-based pricing 
• Gained buy-in for switching and diversifying suppliers by analyzing potential for significant cost savings and performance gains without disrupting the supply chain 
• Performed a make vs. buy study for liners, establishing a business case for outsourcing to save material and operating costs 
• Leveraged benchmarking tools to exceed savings goals for silicones, surpassing company expectations 
• Enabled the procurement department to achieve more with existing resources by providing tools to track and monitor costs for the first time and by training staff in strategic sourcing and negotiation 
• Conducted leadership and organization improvement (LOI) meetings to align all levels and create sustainable EBITDA margin 
• Built cross-functional teams to create standard internal specifications that were not tied to a specific supplier 
• Documented procurement management operating system (PMOS) for future transformation

Lessons learned for other CEOs

• Data analysis opens hidden areas for costs savings 
• No company needs to be at the mercy of underperforming suppliers

The Results

• Improved EBITDA by 10%
• Delivered approximately eight times the company’s stretch savings goal 
• Optimized the supply chain and increased competition by adding optionality and replacing suppliers with historically poor performance 
• Enabled the company to secure financing at a lower rate 
• Ensured the sustainability of EBITDA improvements through training of procurement staff in Maine Pointe’s strategic sourcing process, tailored templates, models, and tools
• Reduced administrative costs by switching from monthly and quarterly spot buys to index-based pricing 
• Analyzed and demonstrated the benefits of diversifying the supply chain (offshore/onshore; make vs. buy) 
• Saved up to 50% on a key BOPET film by replacing the incumbent distributor with the film manufacturer 
• Developed detailed cost profiles for key suppliers, enabling reliable tracking and management of spend