Success Story – “Packaging Materials”
$5 Billion B2B Hardware/Software Supplier
Company Situation and Problem
The client was purchasing materials from a distributor who had installed “free” equipment in exchange for purchasing related supplies. The buy included other standard products which could easily be purchased elsewhere. The current distributor manages inventory. The client had previously solicited bids every two years and believed their “supplier partner” was competitive.
Paladin Actions & Recommendations
Using a feedstock index, Paladin demonstrated that the client had been paying a 10%-15% premium, versus what the index would have predicted, over the 2 year life of the contract! Paladin’s sourcing process included:
- Pre-bid meetings with the incumbent supplier and prior unsuccessful bidders to signal a change in the sourcing process.
- An electronic RFI to a broad audience to determine potential suppliers’ capabilities, to gather information on various alternatives, and to collect feasibility level pricing.
- An electronic RFQ with final lots and detailed, accurate item descriptions to evaluate bidders against non-price criteria and to determine total best value.
With competitive negotiations, the Client received:
- Incumbent supplier dropped their prices 20%! Split award. Alternate bidder awarded significant volume raising savings to 24%.
- No switching costs since “free” equipment is owned by the manufacturer not the distributor.
- Implemented P-card for additional savings and efficiency.
- Tied price movement to feedstock index.
- Contracts require quarterly reviews to address potential non-price cost savings.
Renegotiation of Contract with existing Vendor provided over 20% cost reduction with no disruption in service!