The Challenge
The client — a global manufacturer of construction and mining equipment operating across North America, Europe, and Asia-Pacific — had accumulated over 340 tier-1 suppliers through two decades of organic growth and acquisition. This fragmentation created compounding problems: procurement teams were managing thousands of purchase orders across dozens of categories, supplier quality was inconsistent across sites, and the organisation lacked the consolidated volume to negotiate meaningful terms with any single vendor. A total cost of ownership analysis revealed that transaction and management overhead accounted for approximately 8% of total procurement spend — before factoring in the cost of quality escapes and supply disruptions.
The Approach
The engagement began with a comprehensive spend analysis, categorising all procurement activity by commodity, geography, and strategic criticality. Working closely with engineering, quality assurance, and operations stakeholders, a preferred supplier framework was developed that identified consolidation opportunities across 14 commodity categories. A rigorous supplier assessment evaluated financial stability, quality management systems, technical capability, and long-term strategic alignment. Transition planning was conducted category-by-category, with structured parallel-sourcing periods built into the programme timeline to protect supply continuity throughout the rationalisation.
The Outcome
Over an 18-month engagement, the supplier base was rationalised from 340 to 178 strategic partners. Total procurement cost fell by 23%, with the largest savings concentrated in machined components, fasteners, and electrical assemblies. On-time in-full delivery improved from 71% to 89% as preferred suppliers invested in dedicated capacity and visibility tooling. The procurement team's administrative burden reduced substantially, releasing capacity for higher-value strategic sourcing and supplier development work. The consolidated relationships also provided a foundation for collaborative product development initiatives in the years that followed.