Cost savings on fasteners
Our client, a leading USA-based manufacturer of light, medium, and heavy-duty trucks, buses, emergency and military vehicles, was looking for ways to optimize its portfolio in accordance with its procurement transformation efforts.
We look for any two very similar fasteners in the database.
Let’s assume that we find two bolts that have identical raw material, head type, and finishing, and very comparable lengths, widths, heat tolerances, and thread lengths. Both are purchased in similar quantities over the year, however the price of one of them is 25% higher than the other. This difference in price cannot be explained based on its attributes, and therefore becomes the basis for cost reduction at the SKU level.
This scenario, which occurs most likely many times within the procurement portfolio, describes precisely what easyKost uncovers for its users.
Savings generation process
Three savings generation strategies can be used once easyKost has been intiated, in order to maximize results while maintaining the right amount of work per supplier type.
- Supplier Negotiations: Strategic Suppliers
- Supplier Reallocation & Consolidation: Transactional suppliers
- Tail Spend Optimization & Consolidation: Tail suppliers
Application to client’s database
Using the client’s database, a cost model was created on easyKost. From there, easyKost highlighted the fasteners that are more expensive than they should have been (as shown below). This piece of information was then used to make a savings and representativity analysis per supplier to define negotiation priorities.
Points of interest
The points encircled on the graph are isolated and analyzed individually. Most of them would them become our focus for negotiations
easykost's Control Tower
This module in easyKost give a detailed view on the savings potentials for every category of products available. This makes it easier for the user to prioritize their future negotiations steps
Out of a $93 Million spend in scope, the analysis and modeling estimated a savings opportunity of $5 Million. These savings were represented as follows:
- $2 Million from supplier reallocation
- $2.7 Million from supplier negotiations
- $0.3 Million from tail spend
With the help of easyKost’s recommendations and guidance, the client was able to achieve more than what was intially thought possible.
The below numbers were the outcome of the project:
as a total spend in scope
as the savings target
reduction of the supplier base