Strategic Supplier Management

Obtaining significant price cuts from a quasi-monopolistic supplier
Case study
10/09/2014

Context and challenges

A European industrial group in the health sector was buying medical devices from an American group that occupied a hegemonic position, both in terms of its market presence and its
product innovations.
Our client needed to obtain 10% savings to retain business, in a market where supplier rebates were falling, focusing on strategic suppliers.

Approach and methodology

We implemented a dedicated, multibusinessline task force to develop the negotiation action plan with this strategic supplier. This extended team included Purchasing, Operations, Marketing, Sales and Finance. The team selected the levers that would enable it to once again achieve a power balance in its relationship with this supplier (e.g. non¬quality cost, technological alternative, market awareness, etc.). Each lever was based on jointly compiled statistical analyses. At the same time, the team came up with potential synergies, which could be suggested to the supplier (ideas to develop the business together, joint innovation, industrial and logistics synergies, etc.)
The various functions were briefed regarding the messages to communicate to the supplier, to ensure consistency and credibility.

Results

− More than 12% savings obtained, i.e. more than the last five years combined
− A more balanced relationship has been established, which has become healthier, on equal footing