| CASE STUDY: PRODUCT LINE PROFITABILITY |
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| With sales in excess of $50 million, this division of a $2 billion a year conglomerate was a well established manufacturer of products for health care. One product line with annual purchases in excess of $1 million was not producing desired profit margins.
Rowe Associates Inc., (RAI) was consulted to assist in improving the profitability of the line. We looked at other similar products in the marketplace as well as performing a thorough cost analysis of the products being purchased. Working with their design people, we assisted in changing and refining product specifications. Further, we identified a new source for the product which was capable of producing it for a price within $.10 of our cost target. Using all of the data developed, our client's buyer went back to the original supplier and negotiated significant cost reductions. As a result of these actions, our client had two equally qualified, competitive sources of supply instead of one and a first year cost savings of close to $175,000. |