Although many companies develop lean and efficient manufacturing processes, much of the focus has been on the direct materials that go into finished products.
Despite these improvements, businesses continue to be under significant pressure to further increase productivity. With the challenge of identifying other areas of reduction, businesses have recently begun to look more closely at indirect materials and supplies as an opportunity.
“Indirect” supplies refer to various materials used to make final products such as tooling, safety, hand and power tools, electrical products, and many more.
How much of a company’s transactional activity is taken up by industrial supplies and services?
“Although generally only 5-10% of a company’s total spend, indirect materials can account for up to 70-80% of a company’s purchasing and payment transactions. When properly controlled and managed, indirect materials and supplies can provide significant savings—up to 10% of operating income and 80% of transactional activity.”
With indirect materials, companies incur embedded costs that include excess and obsolete inventory, freight, and labor. Add to the cost of the product itself and things start to really add up.
What is preventing companies from managing indirect materials better?
“The range and breadth of products, combined with the significant number of transactions required to purchase, manage, and pay for these products, has prevented many companies from taking the time to manage and leverage them as a whole. Also, culture and change management have to be addressed when moving to a more disciplined approach. Industrial Distribution Group works with companies to identify and address each of these challenges,” says Charles Lingenfelter, President and CEO, Industrial Distribution Group.
Industrial Distribution Group is a national provider of industrial products and a leader in supply chain optimization. The company specializes in helping businesses lower costs by introducing innovative ways to manage indirect supplies.
What kind of history has IDG had in the industry?
“IDG was formed in 1997 as a national supplier made up of 28 companies, many with a long history in the industrial supply processes and business—some over 100 years. Our unique history as a traditional wholesaler, combined with industry-leading integrated supply technology, allows us to offer the broadest range of client-specific solutions in the industry,” says James Melton, Executive VP and CFO, Industrial Distribution Group.
IDG focuses on leveraging the indirect material process with solutions ranging from an online catalog, to dispensing onsite personnel. By building supply chain efficiencies, the company helps businesses streamline processes, lower overall costs, and improve working capital.
What are IDG’s priorities when consulting a company?
“IDG’s priorities are reducing costs and improving service and working capital. We do this by managing the entire indirect supply process from specification through application. Our people are onsite at the customer’s plant and can match improved technology and products to the customer’s processes,” says Darrel Wilges, VP of Supply Chain Solutions, Industrial Distribution Group.
Before talking about a specific solution, IDG first assesses main processes and quantifies key cost drivers associated with the indirect materials supply chain.
Using their proprietary assessment process, the company works to understand the needs of all key stakeholders and influencers. Application experts then design a custom solution for each site to provide maximum sustainable cost reduction, while maintaining the high levels of service they require.
The process entails a collaborative review with clients to agree on a final solution that will deliver results.
How are IDG’s solutions tailored to your business?
“IDG’s flexible solutions are specifically designed to help clients achieve their desired goals within their unique environment. They help you identify the opportunity. Once you recognize the opportunity, you then focus on key improvements.” says an IDG customer.
Why do clients need a company like IDG?
“A client’s expertise is in making their end product, not necessarily managing the indirect materials process. IDG’s sole focus is on these processes,” according to Darrel Wilges, VP of Supply Chain Solutions, Industrial Distribution Group.
Indirect materials will increasingly become more of a focus as businesses look for new ways to improve productivity and reduce costs.
Given its track record, IDG will play a major role as they continue working with both customers and suppliers to innovate the industrial supply chain.
“IDG has developed proprietary processes that allow us to work collaboratively with each of our clients to bring discipline and control to their indirect materials and processes. Many of our 600+ solutions have been in place over 10 years, and have delivered sustained double digit savings year after year. Our bottom line focus is always on service and sustainable savings,” continued Charles Lingenfelter.
Full Storeroom Management
IDG analyzes your current indirect material process and designs a solution tailored to fit your specific requirements. We will design a step-by-step program to optimize the efficiency and effectiveness of all processes related to the acquisition, receipt, management and issuance of indirect materials throughout your facility. Learn more about FSM