Sourcing EU Automotive SME
Challenge / Requirement
This company’s single largest customer was based in central Europe paid for goods in Euros, the product manufactured for them predominantly consisted of numerous black powder coated sheet metal fabricated panels. All products were originally sourced in the UK from local fabricators with little focus given to cost or risk management resulting in the products consistently being delivered late, damaged or both. The cost effectiveness of these products was further impacted due to the differences between the Euro and GBP. Not only did the company often lose out on the exchange rate they had to include commission on any money transfer.
A Formal tendering exercise was conducted for the portfolio of sheet metal products with companies within the Euro zone considered “Low Cost Countries” (Eastern Europe) i.e. Bulgaria, Poland etc. 20+ suppliers were invited to submit bids for the majority source of the products. The suppliers were shortlisted based on their submitted cost, financial investigations, Pre-qualification questionnaire and obtained references. An onsite Capability and Capacity audit was performed with all suppliers resulting in one supplier located in Bulgaria standing out the best supply option.
The chosen supplier was contract to supply 90% (optimised single HGV shipment) of the monthly requirement, the remaining supply was re-negotiated with the incumbent supplier to assist in the risk management of a single distance source.
The resulting saving to the company when the currency effect was removed (purchase and sell in Euros) was 30% equating to £150k saving from £500k spend. The remaining UK supply was re-negotiated to maintain the original cost by consolidating other products sourced with different small suppliers into a larger portfolio similar to the business lost. To ensure the UK supplier improved delivery and quality in line with requirements, a six month action plan was implemented.