When Last Price Paid Becomes Stale | Turtle & Hughes

TRACKING SAVINGS

SUPPLY CHAIN KPIS& ADVANCED METRICS

When standard supply chain Key Performance Indicators (KPIs) just aren’t good enough, the analytics team at Turtle & Hughes Integrated Supply (THIS) is challenged with developing better ways to track savings based on the customer’s requirements. For one nutrition industry client who was looking to validate our decade-long procurement program, an analysis of long-term savings results led to the creation of a new advanced metric, which transcends typical hard costs and productivity savings and is now used for all established THIS enterprise customers.

TRACKING SAVINGS

The THIS solution was to triangulate the client’s spend and savings against the U.S. Bureau of Labor Statistics Producer Price Index (PPI). This way, THIS can show our landed cost of goods versus a leading independent economic indicator by matching the THIS price to market influences that lie outside straight Cost of Goods (COG) advantage when compared to Last Price Paid (LLP). For each established enterprise customer, we now measure our savings performance against a weighted average PPI called Composite PPI and post it on our collaborative platform, THISone, for easy retrieval and analysis.

Within the composite PPI for our nutrition industry customer, post-recession pricing corrections increased the manufacturing costs of their MRO products by approximately 13 percent. (This is high versus other clients, most likely because over 30 percent of their spend is in the Fluid Power and Pipe Valves & Fittings categories; gas field development and “fracking” extraction practices have driven up the demand for both.)

We compared the increases in the composite PPI to the aggregate price for the fastest moving materials sold to the customer. Fast-moving items represented about 30 percent of what was sold; these are the items least likely to produce savings because they are normally already leveraged for volume. In this case, we reduced pricing by seven percent over four and a half years. The real net effect is that the client is beating the market for MRO by over 20 percent, which provides accurate confirmation that our program is delivering significant savings..

BACK TO SUCCESS STORIES

SERVICES

  • COST SAVINGS
  • INVENTORY METRICS
  • PRODUCTIVITY SAVINGS TRACKING
  • DATA ENRICHMENT
  • SUPPLY CHAIN MANAGEMENT
  • CUSTOM REPORTS