Popular search
Recently visited pages
Case Studies
Optimizing costs with strategic sourcing builds cost advantage for major Chinese bus manufacturer
A leading Chinese bus manufacturer in both local and international markets wanted to improve their competitive position by optimizing their cost structure of supplied parts.
The company realized that they had not monitored and updated their supplier base regularly and that significant potential savings were possible in this field. They contracted ARC Consulting to do a category benchmark project for four of their key components, to assist in the renegotiating contracts with existing suppliers and/or to find new suppliers for the target parts.
Opportunity
In an effort to improve its cost structure, the customer started an evaluation of its production operation process and identified that their supplier base for some key parts had not been continuously monitored and updated. Further analysis revealed that there were 4 key codes that presented the highest potential for savings. After an extensive research and analysis by ARC Consulting, potential savings of approximately 1.6 Million RMB were identified for 3 of the 4 targeted part numbers.
To realize the potential savings, ARC Consulting recommended the client to renegotiate prices with existing suppliers and expand their supplier base with new strategic partners.
Approach
The category benchmark project was done in 3 main steps:
- Step 1: Build a universal database of potential suppliers
- Step 2: Apply a first filter to qualify them: using phone interviews to reduce the number to 20 suppliers
- Step 3: Perform an in-depth analysis of each of the suppliers based on defined parameters to identify a list of finalists.
An initial group of 225 automotive upholstery and mold injection manufacturers were identified and this group was narrowed down to 20 based on the following criteria:
The group of 20 suppliers was then evaluated further against the following criteria to define the 6 finalists:
Finally, for each of the 4 target components at each of the 6 finalists, a supplier profile was created and a benchmark criterion was calculated for comparison. The criterion was set to estimate the purchasing cost for each component (production cost= unit cost x annual purchase volume x contract duration in years). For each supplier, the profile included a “Pros and Cons analysis” and a spider diagram evaluating them on company size, finance capability, production capability, R&D capability, and management capability.
To further support the understanding of the cost structures and decision-making, a cost analysis was done to identify the key drivers and each supplier was evaluated against them.
More Case Studies in “automotive”
