In the automotive world, cost is everything.
That’s why, in a recent case study — titled “Using Advanced Sourcing Optimization to Negotiate Metal Contracts” — an automotive supplier approached MetalMiner for advice on its annual contract negotiations for carbon steel and stainless steel. Using Keelvar sourcing optimization software to evaluate contract awards and supply options, the study assessed both carbon and stainless.
The automotive supplier sources parts and components used by General Motors, Ford, and others, with a product mix including: multiple stainless steel alloys 300/400 series in coils, carbon steel included CRC, HRPO, etc.
To baseline prices for carbon steel, MetalMiner used receipt-level data provided by the supplier to create an average price by SKU by quarter, allowing for price comparison from the bid process against the historical timeline.
In markets with rising costs, organizations can reduce their risk in three ways: placing more spend under contracts with suppliers holding firm the value-added processes (included freight); placing forward buys and hedging.
So, how did the study work?
MetalMiner developed a project timeline and used relevant tools, including MetalMiner’s Benchmark service and metal price forecasting service, in addition to Keelvar, which served as the bid platform.
Using Keelvar, organizations are able to do a number of things. For one, there is the ability to run multiple scenarios for each category with multi-supplier award scenarios. In addition, it allows buying organizations to leverage benchmark prices to inform target rates automatically, not to mention identify errors and wrong quotes comparatively (and thus work with suppliers to readjust pricing) — who doesn’t want that?
In short, bid optimization allows for the receipt of fast and efficient feedback and the ability to manage complex bids.
With the aforementioned background information in mind, what about results? At the end of the day, as mentioned at the start of this post, cost is often everything in the automotive world.
That means results are everything.
So, the bottom lines for this particular study:
- $2 million in identified savings
- $1.5 million in implemented savings
- 69% supplier rationalization for carbon steel
At the end of the day, sourcing optimization does a lot of things, including streamlining the contract awarding process, reducing complexity and quickly rationalizing a buying organization’s supply base.
Check out the full study here.