Fortune 500 Heavy Equipment Manufacturer—Mining Division

This Fortune 500 mining division was formed through over 12 mergers and acquisitions during the past decade. Consequently, the client faced a highly fragmented supply base, lacked formal supply agreements or a global procurement strategy, and experienced inconsistent and volatile pricing across locations. Additionally, there was no standardized process for entering the market. Stringent geographic-specific governmental safety regulations further complicated transitioning to alternative supply sources.

Through site visits across the client’s globally diverse manufacturing operations, the KGM team conducted interviews with key personnel to understand the client’s strategy, organization, operations, and systems. An extensive spend analysis was performed to identify categories with the highest savings potential.

The KGM Team:

• Conducted over 100 interviews with cross-functional and cross-divisional professionals, gathering extensive data to benchmark costs and processes.
• Identified Castings & Forgings, Machined Parts, Hydraulics, Electronics, Ocean Freight, Steel, and Batteries as the initial wave of sourcing categories.
• Recognized the critical need for skill-based training programs.

To capture the identified savings potential, KGM implemented an 11-Gate Strategic Sourcing Process targeting the seven prioritized categories. Global project teams were established in Germany, Australia, China, and the United States to create a hands-on, experiential learning environment for the client’s teams. Suppliers worldwide were engaged to identify best-cost countries by category, with site visits and negotiations conducted across five continents to maximize savings.

• Captured unique technical and governmental requirements for each manufacturing and service location.
• Trained client teams in Process Methodology, Executive Communications, Global Negotiations, Site Assessments, and Alliance Management.
• Established direct relationships with OEMs and mills to transition supply away from distributors and adopt a direct procurement model.

The client achieved over $35 million in cost savings, along with significant operational and service improvements, enhanced engineering and technical support, and a structured cost reduction program with each alliance partner. These results transformed the client’s supply chain strategy and laid the foundation for sustained future savings growth.

• Established global supply agreements for all seven categories, ensuring stable and consistent pricing across regions.
• Instituted a standardized sourcing process through experiential learning.