Heavy Equipment OEM: Supply Chain Optimization & $18M Cost Savings
How a $2B manufacturer reduced supplier defects by 73% and achieved $18M in annual procurement savings.
The Challenge
A $2B heavy equipment manufacturer was experiencing escalating supplier quality issues, delivery delays, and raw material cost increases threatening profitability.
Supplier quality defects causing $8M annually in scrap, rework, and line stoppages
On-time delivery rate at 72% — regularly missing customer commitments
Bloated supplier base of 450+ with no strategic segmentation or performance management
Raw material costs increasing 12% year-over-year with no procurement strategy
No supplier audit program — many suppliers had never been visited
Our Approach
Deployed comprehensive supply chain excellence methodology across procurement, supplier quality, and logistics operations.
Phase 1: Supply Base Analysis & Segmentation (Months 1-3)
Mapped entire supplier base by spend, risk, and strategic importance. Identified critical-to-quality suppliers. Established supplier segmentation framework (strategic, preferred, transactional, exit).
Phase 2: Supplier Audit & Development (Months 4-9)
Conducted on-site audits of top 50 suppliers. Implemented supplier development programs for strategic partners. Established monthly supplier scorecard system with clear performance thresholds.
Phase 3: Procurement Optimization (Months 7-12)
Renegotiated contracts with consolidated supplier base. Implemented strategic sourcing methodology. Established long-term agreements with volume commitments in exchange for pricing stability.
Phase 4: Logistics & Delivery Improvement (Months 12-18)
Redesigned inbound logistics network. Implemented supplier-managed inventory for high-volume parts. Established delivery performance penalties and incentives.
Results & Impact
Transformed supply chain performance across quality, delivery, and cost — delivering $18M in annual procurement savings.
Incoming quality defects reduced from 4,200 PPM to 1,134 PPM
On-time delivery improved dramatically through supplier development and logistics optimization
Achieved through supplier consolidation, renegotiated contracts, and waste elimination
Reduced supplier base by 60% while improving performance and reducing risk
Additional Outcomes
“$18 million in annual savings and supplier quality defects cut by 73%. The supply chain transformation paid for itself within the first quarter.”
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