“Our growth forced us to critically look at our processes and determine where we wanted to focus,” said the procurement manager of this company.
At this leading Dutch high-tech manufacturer, operating from the heart of Eindhoven, more than 1500 people work on complex modules for the semiconductor industry.
In recent years, this company has experienced impressive growth. This success brought new challenges, particularly in their procurement strategy. The central question was: which tasks are core activities and which can be outsourced?
The conclusion was that tail supply was not a core activity but was essential for the continuity of production. This company asked MAG45 to come up with a suitable and scalable solution.
From Analysis to Action
MAG45 started with a thorough scan of the entire tail supply. This revealed improvement points in four key areas: tail supply consolidation, Vendor Managed Inventory (VMI), just-in-time delivery, and kitting.
These improvement points were translated into a business case with the premise that various company departments, such as logistics, process, and procurement, would experience the benefits of an integrated tail supply. The optimization of this led to a TCO saving, which was the main KPI of the business case.
This company chose a phased implementation. They started with VMI. After this was successfully implemented, the second project began: the consolidation of the tail supply. This sequence ensured a gradual but effective optimization of the tail supply.
Process Overview
In summary, the process looked like this:
- Inventory of the supply chain: An in-depth analysis of the current situation, elaborated into a TCO business case.
- Setting up the supply chain: A redesign of the tail supply chain.
- Service delivery: MAG45 largely took over the tail supply and managed it based on carefully selected KPIs.
Measurable Results and Benefits
The approach and new way of working led to an impressive 27% TCO reduction. Where this company previously applied improvements on an incidental basis, MAG45 offered an integrated solution with proactive quality management. This resulted in a significantly reduced workload and increased reliability of the supply chain.
MAG45 investigated where the performance issues in the supply chain lay and found the perfect balance between short delivery times and cost efficiency. The agility of the supply chain, which provided the much-desired flexibility that companies like to maintain or acquire, was also considered.
What Did a ‘Tail Supply Takeover’ Look Like in Practice?
Through consolidation, procurement was now handled by one party. This company no longer had to manage individual suppliers, significantly reducing the workload and administrative tasks.
MAG45 assembled a dedicated customer account team that constantly communicated with all stakeholders and was regularly on-site for effective coordination. A dedicated service person was available for all questions, and monthly operational KPIs were tracked. A key account manager oversaw the entire process, and strategic sessions were held at the executive level every six months.
