News & Research: Client Successes

Case Study: Supply Chain Cost Savings Estimation

A major, integrated electric company in the Northeast requested that ScottMadden conduct an independent assessment of current best practices in supply chain organization across leading companies.

• The client was examining alternative approaches to reducing various support service costs. Several internal teams were launched to examine alternatives
• ScottMadden was retained to support two internal teams focused on supply chain cost savings opportunities. One team examined strategic sourcing cost reduction in non-fuel spend while the other examined inventory cost reduction opportunities
  
• The objective was to identify cost reduction opportunities at a sufficient level of detail to enable the results to be immediately actionable upon acceptance by management

• Strategic Sourcing: ScottMadden's support to this team included:
  • Spend Analysis: Constructed the most recent 12-month spend profile and examined opportunities for savings
  • Supplier Analysis: Identified and analyzed spend fragmentation across key suppliers
  • Benefits Projections: Identified spend categories with the highest savings opportunities
• Inventory Optimization: ScottMadden's support to this team included:
  • Best Practice Assessment: Compared the client's current practices to those of leading companies
    
  • Inventory Performance Assessment: Compared key performance measures
  • Inventory Optimization Estimation: Employed inventory models used to compare the client to "peer group" inventory levels and determine the impact of achieving mean, top quartile and decile performance

• Identified savings opportunities of $25 million to $30 million per annum based upon analysis of addressable spend as a result of strategic sourcing
• Identified potential inventory related cost savings of approximately $20 million to $25 million per annum at full inventory carrying cost and from $5 to $6 million per year based upon direct O&M cost savings if median "peer group" inventory levels achieved