Extraordinary solutions: an in-house supplier store increases profits

aqua-chem, Inc. provides leadership in the design, marketing, and manufacturing of equipment to produce high-purity water for key markets worldwide. Based in Knoxville, Tennessee, their position of world leadership in water technologies began in 1929; today, their major market segments include military and government, pharmaceuticals and biotechnology, offshore energy exploration, and bottled water.

aqua-chem's management team chose to review its Factory Consumable spend in an effort to get the most competitive prices from suppliers while exploring alternative methods for procuring, controlling, and managing their factory consumables spend. Because of the potential size and scope of the project, Expense Reduction Analysts' client manager, Art Buckman, teamed up with consultant Bradly Davidson, C.P.M.

Davidson used his considerable knowledge of the MRO/ Factory Consumables industry to conduct a thorough investigation and analysis of aqua-chem's prior year's spend.

"We selected Expense Reduction Analsyts to help us identify ways to reduce costs and are very pleased with the results," said Mike Lenzie, CFO of aqua-chem. "The actions we implemented have dovetailed nicely with our overall strategic initiatives."

"What started out to be a costreduction project turned into a major supply transformation project" commented Davidson. "An important consideration in analyzing the various supplier offerings and capabilities was aqua-chem's desire to have a solution that included vendor managed inventory utilizing pointof-use dispensing machines."

David Hansard, aqua-chem's Purchasing Manager stated, "Expense Reduction Analysts operated in a very professional manner working with our project team. Savings were achieved through their expertise and willingness to understand our specific requirements. I was most impressed by the level of detail and data analysis presented."

Using a graded RFP approach, it was determined that the incumbent suppliers could not provide the optimal solution. Expense Reduction Analysts recommended that aqua-chem select Fastenal Company and outsource the entire tool crib management. Fastenal provided a customer specific solution that included establishing an In-Plant Fastenal Store. This store, staffed by a Fastenal employee, eliminated all procurement, receiving and inventory management functions, and stocking inventory on a consignment basis. Fastenal's implementation team, through collaboration with aqua-chem's project team implemented the InPlant store in just 30 days.

"Expense Reduction Analysts delivered great results. The Fastenal In-Plant store exceeded our expectations. The new supplier and store were implemented without significant effort on our part. In addition, ERA put into place service level agreements where none had previously existed with the incumbent suppliers," said Francisco Santos-Silva aquachem's Director of Operations.

Expense Reduction Analysts' work achieved a piece price reduction, reduced inventory expenses to zero for MRO items, and removed aqua-chem from storeroom management; they can now focus their efforts and resources on their core competencies. In addition, aqua-chem has dramatically increased its ability to track materials and costs that go into every product manufactured on a per project and employee basis. This gives aqua-chem more accurate information on the true costs of production and profitability. Given Expense Reduction Analysts' contingency-based fee structure, aqua-chem was only invoiced for a portion of the actual savings after they have occurred, eliminating financial risk.

Lenzie stated, "I am comfortable in recommending Expense Reduction Analysts to other organizations interested in improving their profitability." Your success story is waiting to be written. Get started lowering costs for your company.

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