Sustainability and cost optimization as a win-win situation
Transformation at long-established consumer goods group
Our client is one of the leading European manufacturers of gardening and cutting tools with a long-established tradition and more than 10 well-known brands. In the last ten years, the company tried to achieve growth mainly through acquisitions but the group’s profitability deteriorated.
Consumer Goods
Objective: Become a modern, sustainable company
In these challenging circumstances, the joint project was launched. The aim was to create new structures and framework conditions for procurement, generate significant cost savings and at the same time improve the sustainability profile of the company. Another important point was the reduction of complexity and the resulting optimization of the product portfolio.
Approach: Comprehensive procurement program
Together with the client and based on a detailed analysis, the project team set up a comprehensive procurement transformation, the implementation of which was scheduled to take several years. To achieve this, several integrated workstreams were defined that included all direct and indirect categories. For each workstream, we needed to define different approaches, with advanced levers such as value engineering, for selecting and negotiating with suppliers.
In cooperation with the client, we accompanied the transformation with change management processes. New working methods and tools were introduced in the procurement team and extensive programs were created to build up the necessary skills. In this context, we were able to raise awareness of which factors beyond costs are essential for procurement to be fit for the future.
Value engineering to reduce costs and increase recycling rates
To identify the cost savings potential for the individual core products, we analyzed the key products in terms of their individual cost components as part of a value engineering approach. In addition, we examined the effects of using recycled materials for the plastic components, with the result that we could achieve a cost reduction in the high six-digit range and at the same time deliver very substantial savings in CO2.
Reducing complexity to increase profitability
The consumer goods manufacturer’s production was running at the limits of its capacity, which meant that the production volumes that would have corresponded to its growth ambitions could not be delivered accordingly. A high number of changeovers on the machines and the low production volume of some products led to significant inefficiencies and time losses.
We analyzed the product portfolio and identified inefficiencies in production. Based on this, the company was able to eliminate products with large inefficiencies and low volume at the same time, thereby creating additional production capacity for the core products in the range. By reducing complexity and bundling for some products, we were able to free up a substantial amount of production days, thereby enabling the company to achieve its growth targets.
Due to unreliable order processing and costs above market prices, our client also parted ways with its previous 3PL partner in its key Asian market. To make the local supply chain more resilient, we supported extensive tenders and negotiations with suitable new suppliers.
Sustainable procurement through optimization of sea freight container fill rates
Our client’s container utilization rate was at around 70%, and several million € were spent on transporting empty containers. The joint team took a detailed look at the company’s logistics requirements and introduced a decision tree for those responsible. In the future, this will serve as a best practice for shipping to ensure the selection of the most suitable shipping method – both from a cost and climate perspective. By optimizing the overview of shipping breakpoints, we were able to increase transparency and support the selection of the most efficient shipping methods.
In addition, by calculating the potential CO2 savings through optimized shipping, we were able to raise the environmental awareness of the suppliers and the logistics department and provide further decision-making support. In total, the company could save several hundred tons of CO2 annually just by optimizing the filling rates.
Strengthening performance and governance through marketing realignment
To increase overall marketing spend performance, the project team renegotiated online and offline spending with partner media agencies. The focus was strongly on increasing marketing performance and Return on Advertising Spend (ROAS).
To be able to measure this adequately in the future, we introduced a KPI set and agreed contracts for our client’s core markets that included performance-related compensation based on the defined KPIs. In addition, we were able to use a KPI dashboard to increase the transparency of the services purchased as well as the control options. In addition to significant savings, a considerable improvement in ROAS was achieved.
Results:
- Reduction of manufacturing complexity and increase in EBIT
- Several thousand tons of CO2 savings annually by optimizing the filling rates, and challenging material choices
- Increasing recycling rate with significant cost savings and CO2 reductions
- Increasing the resilience of local supply chains
- Improving commercial performance
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