MRO: Industrial Supplies – Fastenal
Buyer Details
Member Industry: Packaging
Revenue: $3.5 billion
Employees: 15,000
Existing Condition
Toward the end of 2006, a packaging company working with more than 15,000 employees and sales of over $3.5 billion in a global marketplace made the decision to create a center-led strategic procurement team for indirect spend that would have decentralized execution. In their efforts to recognize areas of spend that would have the most opportunity for savings, the packaging company discovered Corporate United, the nation’s largest group purchasing organization. The company simultaneously developed a relationship with Corporate United, explained the value of the GPO to about fifteen of their locations while establishing internal partners, and determined with Corporate United’s help that MRO should be the first category to tackle.
Solution
In analyzing their company-wide spend, the packaging company found their total MRO spend to be more than $5 million, most of which was with Grainger Industrial Supply. Corporate United presented the highlights of its MRO agreement and offerings through The Fastenal Company to the procurement team. After learning about the leveraged contract pricing available to all Corporate United members, customer-centric account management, and customer specific core item list pricing, the team asked Corporate United to conduct several assessments across several locations to determine the benefits of improving their MRO buying habits and signing Corporate United’s MRO contract. The first assessment was of one facility’s spend from January through August 2006. Corporate United analyzed the $1.5 million from this time period and discovered a 12% savings over what the packaging company spent with Grainger.
Results
All of the assessments on the company’s MRO spend resulted a definite savings if the switch were made from Grainger and other suppliers to Corporate United’s agreement with Fastenal. Intrigued first by the savings opportunities and then by Fastenal’s service-oriented business model and value-added services, the packaging company signed Corporate United’s national agreement with Fastenal. In doing so, they achieved national account status with Fastenal, as do all Corporate United members on the contract, and were given a local account management team to help with implementation and provide them with detailed sales and usage/accountability reports. Corporate United has assisted with implementation of the Fastenal contract at 23 of the packaging company’s 33 facilities. Compliance on the contract is at 70% and improving. Thanks to the combination of Corporate United’s assessments and the company’s center-lead procurement activity with decentralized execution, this packaging company is adding to its bottom line and focusing on procurement that is strategic to the business.
"The greatest return on the investment and effort of getting involved in a GPO is that sourcing managers now can focus their time on more strategic assignments while retaining the value of the outsourced expertise on the supplier’s pricing strategy. Corporate United provides an opportunity to leverage spend with minimal additional resource allocation."