Case Study: Corcentric’s Procurement Help Desk Model
Enabling the Business with
On-Demand Supply Chain Support
Leading Medical Device Manufacturer Gets Strategic with Global Supply Base
With 90% of the client’s manufacturing operations in China, the organization relied heavily on their diluted supply base for the intellectual property of their product line. Tired of the situation, they resolved to redesign their sourcing strategy. By opening a new manufacturing facility in Mexico, they could leverage lower wages while expediting transit and reducing their shipping costs. They soon recognized, however, that their efforts were imperfect. Gaps still existed in their ability to identify suppliers and build a sustainable supply chain.
With the goal of nearshoring supply operations to Mexico to gain more control over their supply base options, strengthen their Procurement operations, and facilitate continued business growth, the medical device company needed supplemental support.
They planned to hire a single expert resource to support their goals, believing the scope of activities to entail identifying contract manufacturers and assessing specific components for their products.
They needed a resource who not only understood the sourcing process, but was capable of:
- Operating within multiple categories and commodity groups and understanding their associated nuances
- Communicating effectively with R&D: discerning their requirements; translating those requirements into sourcing events; and successfully identifying the right suppliers
- Navigating multiple geographies efficiently
- Conducting multiple projects concurrently
Before long, they realized their multi-layered scope of projects was too much for a single resource to successfully execute. Unsure of the best approach, the medical device manufacturer reached out to Corcentric.
While discussing the company’s challenges and goals, Corcentric identified the need for a more strategic approach. The company needed a dynamic support model to address their diverse needs, like flex support resources with subject matter expertise across a multitude of categories, as well as deep knowledge of nearshoring and engineering to support some of their direct materials initiatives.
Rather than proposing an inflexible model based strictly on hours or number of resources, Corcentric suggested they try something different: Sourcing and Procurement Help Desk.
Direct Materials Sourcing Execution
Like countless other industry-leading companies, the medical device client needed a Procurement organization strategic in nature and capable of enabling their enterprise-wide objectives. Corcentric’s Sourcing and Procurement Help Desk delivered just that. The dynamic model offered the client a flexible bench of Procurement resources spanning from sourcing execution support and category-specific subject matter expertise to eSourcing tools and templates – all for less than the cost of a single hire.
Supporting the medical device company’s overarching business objective of transplanting manufacturing operations from China to Mexico, Corcentric’s team developed a strategic plan for targeting particular product line categories first, while simultaneously identifying and executing other sourcing activities. Within the first year alone, Corcentric successfully conducted over 15 different initiatives across six commodity groups in multiple geographies. These produced savings in excess of the costs to hire us.
In search of cost reduction, process optimization, and more strategic supplier relationships, the client leveraged Corcentric’s Help Desk team to source a number of direct materials.
Direct materials sourcing initiatives require a high level of collaboration. Unlike indirect spend categories, direct material and contract manufacturing rely on enhanced communication between R&D, Engineering, and other internal stakeholders. Failure to efficiently source these commodities can result in testing redundancies, rework, increased costs, and production delays. Alternatively, successful direct material sourcing can result innovation, reengineering, increased quality, and enhanced product attributes at even lower costs.
The flexed support of the Procurement Help Desk meant the client could tackle a variety of sourcing initiatives—ramping up and down resources and subject matter experts depending on the project complexity.
Logistics & Supply Chain Optimization
Corcentric’s comprehensive program went beyond category sourcing to optimize operations, support the implementation of new suppliers, and evaluate alternatives to reduce costs across all spend categories.
With our support, the client established an entire supply chain in China for various commodity groups and developed a sustainable vendor implementation process.
Additionally, in an effort to replace human operators with automated sewing, stitching, and cutting machines, Corcentric conducted an “Automation Project.” This involved evaluating equipment costs, different levels of automation, cycle times, and line configurations, to determine the optimal strategy.
Strategic Support & Risk Mitigation
Following the transition to Tijuana, the client approached Corcentric to help plan for “the next big move.” This included evaluating the benefits of using a contract manufacturer and the benefits of establishing a facility in Europe to support demand in that region. Corcentric assessed the cost of contract manufacturing services in low-cost European countries (including Poland, Estonia, and Lithuania.) Findings showed that leveraging contract manufacturing services in the EU would not be cost effective.
Given the client’s strategic roadmap and diverse product line, a thorough evaluation of competing products was necessary to determine the viability of designing and positioning new product lines in the market. Corcentric was then engaged to benchmark the cost of a competitor’s product by reverse engineering the product and sourcing its components. This provided for a Total Cost of Ownership (TCO) comparison. Findings resulted in redefining the strategy for Make vs. Buy.
Nearshoring & Global Sourcing
With swirling political tensions in Southeast Asia, the client hoped to identify alternate suppliers for various product components. At the time, about 95% of their supply base was located in China. Wary of sudden embargoes or other trade restrictions that could limit the availability of materials, they wanted to diversify their supply base. They initiated this process by establishing a new manufacturing plant in Mexico. Next, they sought Corcentric’s help in implementing sustainable supply chains to support it.
Corcentric worked to help build supply chain relationships in Mexico. These were primarily to support production, serve local demand in California, and ease the transit times for flagship products. While Corcentric was successful, they learned that opening a Mexican facility without a pre-vetted supply base had been a risky move. Corcentric’s team discovered that local Mexican suppliers were sourcing their materials from China and marking them up.
Nearshoring is a powerful, valuable practice, but it’s not always the answer for every commodity. Before making such a consequential decision, companies must first understand where raw materials are coming from. Product sampling is an integral part of this process. Had the client consulted Corcentric earlier, the team would have advised evaluating or establishing a localized supply chain before moving production entirely. Nevertheless, Corcentric supported the client’s new requirements and efforts in Product Automation and Cord Replacement.
Corcentric was also asked to focus on Chinese operations. The client looked to optimize the existing operations and address risk factors including intellectual property theft and political tensions while identifying alternate suppliers for textiles and other commodities across Southeast Asia. The Help Desk team facilitated the product sampling process for all component sourcing projects.
Corcentric then worked to locate direct sources of supply that could ship to both California and Tijuana. The team successfully identified and qualified a number of legitimate Chinese suppliers for textiles, plastics, and other commodities. By facilitating site visits and other audits, Corcentric established contact with a number of suppliers that the client still engages today.
In Eastern Europe
In support of the client’s “Next Big Move,” Corcentric identified dependable contract manufacturers in Europe to provide textiles and plastic sub-assemblies. These contract manufacturers would support demand in the European, Middle Eastern, and African markets.
In the Middle East
In hopes of diversifying without raising raw material and manufacturing costs, the Help Desk team explored different economies. Boasting strong textile industries, these could provide the high level of sophistication necessary to meet the client’s strict product requirements.
Through Corcentric’s flexible Help Desk model, the medical device manufacturer established more sustainable, efficient, and cost-effective operations. The cost reduction and value generation allowed the initiative to effectively pay for itself. Additionally, the knowledge transfer that occurred throughout provided their Procurement team with a deeper understanding of their role and responsibilities. As a result, they were left with a well-established Procurement group equipped to provide continuous support for their organization.
Procurement’s role and responsibilities grow more complex by the day. That means it’ll only grow more challenging to build and support a world-class department. It’s not enough to invest in people, technology, or process improvements. Organizations need to assess their current state, develop goals, and work toward building and maintaining the appropriate selection of resources.
Don’t waste time and money building the Procurement department you think you need today. Call Corcentric’s Procurement Help Desk to collaborate with industry-recognized experts. Together, we’ll construct a Procurement function capable of serving your long-term objectives.
- Direct Materials Sourcing Execution
- Logistics + Supply Chain Optimization
- Strategic Support + Risk Mitigation
- Nearshoring + Global Sourcing
About the Company
A leading manufacturer of medical devices headquartered in North America found themselves dealing with the pains of a global supply base without a mature Procurement department to provide oversight of costs and vendor relationships. They maintained a largely reactive Procurement department. Any strategic sourcing efforts were triggered, driven, and overseen by their R&D and Marketing teams. As products were designed and reengineered, they launched sourcing efforts to identify suppliers capable of providing materials and meeting particular specifications.
hard dollar savings
product lines sourced