- Case study
How procurement fuels growth for an aerostructures manufacturer
And makes its biggest customer more competitive
A global aerostructures manufacturer.
To help its largest client—an aircraft company—become more competitive while reducing its own direct material costs by 20%.
Lower direct material costs, a leaner and less risky supply base—and the gratitude of its biggest customer.
This aerostructure manufacturer’s largest customer was struggling to keep supply chain costs low. The customer directed the manufacturer to help make it more competitive—so that it could sell more airplanes—by cutting its direct material costs by 20%. That’s when the manufacturer turned to us for help. Working together, we found ways to rapidly reduce material costs.
Challenge
The aircraft industry is experiencing growth on the back of strong travel demand. To keep pace, aircraft companies are increasing production — which puts pressure on the industry’s supply chain. To sell more airplanes, aircraft companies depend on suppliers like our client, an aerostructures manufacturer, to help them cope with the stress and reduce costs.
To quickly respond to the customer’s request to reduce direct material costs by 20%, our client needed to renegotiate supplier contracts — a task hampered by its complicated and inefficient procurement processes. Some of the challenges:
Solution
Here’s how it all played out:
Step one: Diagnostic assessment
We conducted a two-week assessment to measure the maturity and effectiveness of the manufacturer’s existing direct sourcing process. After identifying gaps, we:
Step two: Procurement transformation
Step three: Site visits and RFX development
Step four: Contract management
Step five: Supplier negotiation
Step six: Supplier development
Impact
The manufacturer achieved much more than what it had initially expected. Here’s how it benefitted after we fundamentally changed its approach to direct sourcing and negotiation:
We not only helped the manufacturer transform direct procurement. We also helped its largest customer reduce production costs and earn more airplane contracts, which strengthened relationships between all parties.