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CASE STUDY: Slashing MRO Spend

IM Supply Helps Fortune 500 Chemical Company Save More than $200K

A Missouri-based Fortune 500 chemical company needed to cut costs. MRO spend was ballooning out of control at the company’s plants and wasting several million dollars annually. The company decided to revamp its supplier program and they revisited every single supplier arrangement they had.

Their network of plants spanned the United States and Canada and ranged from the very large (with more than 1,000 employees), to the very small (employing only a handful of workers). They needed a new MRO solution provider who could work across borders and deliver the same level of service for the large and small plants.

To help rein in costs, the company brought in IM Supply to take over their electrical and lighting MRO supply needs. IM Supply began working with 10 plants in the United States and Canada.

Through a robust program of inventory streamlining, energy savings, and negotiating better pricing from manufacturers, IM Supply trimmed costs by nearly 7 percent, or more than $200,000 in the first year. These savings surpassed the customer’s goal of 5 percent savings.

The key to IM Supply’s success was rapid implementation. “We rolled out our implementation in just 30-60 days,” said Jared Johnson, national account sales manager at IM Supply. “That was key from a customer standpoint. They were expecting savings to come out of the deal and if you don’t implement quickly and effectively, you won’t be able to generate savings.”

The first step in implementation was what IM Supply calls a “crib crawl”—a hands-on process of physical inspection of electrical and lighting MRO inventory at each plant.

“We analyze the storeroom cribs and warehouse spaces to see what they currently stock,” said Jared Hoover, president of IM Supply. “Then we compared that to their purchase history reports and calculated new min./max. levels for them. We bought up some of their excess inventory and let the rest wind down through use without replenishing them until they hit the new minimum level.”

Reducing carrying inventory was an important part of helping the chemical company lower its spend.

“The customer viewed it as a direct savings to reduce unnecessary inventory from their system and this process is a key part of streamlining inventory,” Johnson said.

Besides streamlining the physical inventory, IM Supply also scrubbed the customer’s data, cleaning its ERP system and making it more efficient to use. With the improved usage data, IM Supply was able to negotiate better pricing for the customer with the manufacturers it used. The resulting hard savings were dramatic and had a tremendous impact on the customer’s overall spend.

IM Supply reviewed the company’s energy usage and recommended a three-pronged approach to lower power costs: first they upgraded the lighting with LEDs and energy-efficient controls. This significantly decreased electricity costs for the company. Along with the LED upgrades, IM Supply, reduced the inventory of outdated and inefficient technology the customer had on hand to cut future energy costs and curtail the operating costs associated with carrying inventory. The third prong was the ultra-long operating life of LEDs, which also delivered maintenance savings for the customer.

Throughout the process, IM Supply made sure to keep the customer informed so everyone understood what they had to do.

“We have a consistent and detailed plan we use to implement savings for customers,” Johnson said. “We can explain to the customer what their role is in the conversion; our distributors know their role and we can very quickly do what we need to do. During implementation, we held weekly calls with the customer’s corporate office to go over everything.

“Now, we keep in communication with biweekly calls to corporate and quarterly business reviews where we talk about where we’ve been effective and how we are going to continue. These keep everyone on the same page.”

IM Supply was able to deliver substantial results and exceed expectations thanks to its network of nearly 800 distributors near the customer’s plants and its robust system integration and e-commerce capabilities.

 

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