Bringing it Together: How a Global Automotive Parts Company Formed an Indirect Materials Strategy after Acquiring New Brands

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Member Profile

First Brands Group™ is a global automotive parts company that develops, markets and sells premium products through a portfolio of nine market-leading brands: Raybestos® complete brake solutions, Centric® Parts replacement brake components, FRAM® filtration products, LuberFiner® filtration products, TRICO® wiper blades, ANCO® wiper blades, Carter® fuel and water pumps, Autolite® spark plugs, and StrongArm® lift supports.

In 2020, the newly formed First Brands Group™ (FBG) set out to develop a strategy to understand and optimize the indirect materials spend of all these legacy companies. They chose Amicus Spend Management to help them in this endeavor, leaning on the company’s 20+ years in source-to-pay services in indirect materials and services procurement.

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Overview

FBG conducted an RFP to identify the right service provider that could help create a standard Source-to-Pay strategy across the United States and Mexico. The first objective was to get visibility into the spend across the nine brands with 29 individual sites. Although some of the legacy organizations had the ability to provide historical spend data, most did not. The second objective was to find a provider that could consolidate the vendor base and standardize that payment terms, ordering, invoicing and reporting process to further support a standard approach for the newly formed company. Lastly, FBG wanted a provider that could effectively achieve cost savings through competitive sourcing events once the data had been cleansed.

After a months-long evaluation period, Amicus was selected based on its ability to act as an agnostic extension of FBG’s procurement, accounting and IT teams in a transparent approach to support a new standard in indirect materials and facility services procurement. An MSA was put in place that included:

• One consistent management fee across all transactions
• Standard payment terms across all transactions, based on country
• Standard invoicing process
• Item-level reporting in Amicus’ on-demand dashboards
• A dedicated team of buyers led by one of Amicus’ experienced Purchasing Managers

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Approach

Two decisions were made early on to allow for a fast launch and minimal change management for the sites as they were focusing on transitioning other functions of their business.

First, FBG and Amicus agreed to treat all transactions as “Directed Spend” for a period, meaning there were no changes to the supply base or items being purchased. This was done since there was very little historical spend data to analyze. The purchase orders would simply begin flowing through Amicus and then immediately out to the incumbent supplier, allowing Amicus to capture the details in the process to begin creating item master records based on manufacturer name and manufacturer part number.

Second, Amicus would begin receiving POs in whatever manner the companies had historically transmitted them to alleviate the need to create several system interfaces.
The long-term plan consisted of evolving this approach to become more strategic in both sourcing and purchasing process once item-level data visibility was achieved and a standard ERP system was selected by FBG.

Phase 1 included Amicus setting up FBG’s top suppliers in its own systems to facilitate rapid transaction processing once orders were placed. Amicus worked with each of the nine legacy companies to understand which vendors supported a large volume of orders or were not in line with the company’s standard payment terms of 90 days. A threshold of $50K of annual spend was used to help determine where to focus efforts. Vendors that facilitated an annual spend of less than this would be set up as needed. It was decided that this would be done in several waves based on the legacy company to take advantage of any vendor overlap they had.

During this same time, Amicus’ launch team began working to capture all critical information related to requisitioners, cost centers, invoicing requirements and logistics deals. This work would ensure that all purchases would not only ship quickly and be visible across the enterprise but would also be allocated properly based on established financial entities.

Phase 2 included Amicus’ purchasing team initiating a mass-onboarding process of hundreds of vendors. If these vendors had the ability to provide data on what items FBG purchased from them, Amicus captured that information as well. Item records were then created in Epic®, Amicus’ e-procurement tool, and included:

• Manufacturer name
• Manufacturer part number
• Supplier name
• Supplier part number
• Current price
• UOM
• Ships within timing

FBG requisitioners would then refer to the Epic® catalog at the time of order to capture the current price, ship time and Amicus part number.

If the vendor was not able to provide item-level data on historical FBG purchases, it was agreed that Amicus would capture that information at the time of re-ordered.

To fund the work Amicus was doing, FBG and Amicus teamed up to approach all these vendors for discounted pricing. This was positioned with the vendor as a way of creating a more streamlined ordering and invoicing process with FBG, which had historically been complex and time consuming for them. Many vendors understood the value provided by Amicus and agreed to at least some level of discount.

“Go Live” for the first wave of sites was June 2021, within 10 weeks of an agreement being put in place. It was mutually agreed upon by both Amicus and FBG that having 80% of the critical vendors onboarded would be the threshold for “Go Live” which then carried into the next waves. Dedicated Amicus buyers were assigned to one or more FBG sites based on their purchasing volume to ensure timely order processing and issue resolution.

Over the course of five months and three waves, Amicus launched its purchasing services across 29 sites in the U.S. and Mexico, effectively becoming its purchasing arm for tail spend and some strategic categories.

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Key Elements of Implementation

• An executive sponsor on the FBG team.
• Establishment of close working relationships between the Amicus launch team and FBG’s subject matter experts in AP, Finance, Purchasing, Taxation, Logistics and Operations to ensure seamless transaction processing.
• Plant champions at each site who could help Amicus navigate replenishment, payment, and other internal processes.
• Working closely with site requisitioners to educate them on their role in the improvements being made to data management and process optimization.

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First Year Results

Within the first year, Amicus helped the member achieve:

• 16% gross savings on managed spend where sourcing recommendations were implemented
• $1.27M in savings by reducing the client’s internal costs to manage suppliers
• 909 vendors set up and transacted with on the client’s behalf
• Vendor base consolidation
• Standardized payment terms across 615 suppliers, based on country
• Common order placement and invoice payment processes for a large portion of the spend
• 30,000 item-level master data records created, including manufacturer names and part numbers
• 30,000 RFQs, POs, and invoice lines processed