Waypost Case Study: Supply Chain Cost Reductions for EBITDA Improvement
Two construction material companies were recently purchased by private equity with the task of merging in-common resources and identifying cost-savings with a goal of improving EBITDA by $2 million in the next fiscal year.
The COO of the new entity engaged Waypost Advisors to assess key business activities and uncover opportunities to reduce costs, leverage best processes between the two companies, and merge the two separate supply chain teams into one cohesive organization.
The Approach:
Waypost Advisors provided a team of four advisors with expertise in key areas including transportation, warehousing, sourcing, purchasing, planning & inventory, fleet management, business processes, and organizational structure. Over a period of three weeks our Advisors aligned with leadership on key objectives, identified stakeholders and subject matter experts, and executed interviews with SMEs to deep-dive processes and decision-making criteria. Data analysis was performed across both company’s portfolios and included:
- Identification of categories of spend (raw materials, packaging, indirect materials and services, transportation by mode, and warehousing)
- Inventory stocking levels for raw materials and finished goods for both companies, including an analysis of actual stock points against optimal stock points, using the Waypost Optimal Stocking Tool™
- Freight markup policies and freight margin loss
- Forecasting accuracy and production scheduling lead-times with impacts on manufacturing overtime and labor utilization
- Inter-company product transfers between warehouse locations
- Fleet utilization, dwell times, geographic deployment, and maintenance
The Waypost team collected data and mapped processes to illustrate the current state of supply chain activities and potential cost saving opportunities that could result from merging teams and implementing best practices. Our Advisors coached the newly merged team toward efficiencies that, when implemented, would yield significant time and monetary savings for our client. Opportunities included RFP execution in ideal markets, simple forecasting, inventory planning, and production scheduling frozen fence tools, while using data-driven analysis to recommend stocking points.
The Results:
Waypost identified a median opportunity of $1.3 million in cost-savings, with a range of $700k to $1.9 million. This represented around 7% of EBITDA for the combined companies.
After reviewing the findings of our assessment, the Client chose to engage with Waypost Advisors for ongoing implementation of the recommendations. Our involvement allowed their teams the time to focus on day-to-day activities and integrating two organizations while making progress to the targeted savings, which was critical given the condensed timeline of six months until the new fiscal year.
The Waypost team supported our client through leadership and coaching, while achieving several key initiatives.
- Execution of transportation RFPs
- Renegotiating terms for inbound raw materials and packaging
- Build and train their team on simple, customized forecasting tools
- Support 3P warehouse exits
- Project management to track and achieve stated goals
The work results in cost-savings that were 10x the investment with Waypost Advisors.