Legacy Sourcing Project large Aero Engine Manufacturer
Challenge / Requirement
A number of electrical harness products used on out of production (Legacy) aero engines were due for contract renewal. The products were spread amongst 3 different suppliers with only non-production, end of life engine service requirements remaining, making long term contracts for the products less commercially attractive.
All requirement for these harnesses was amalgamated into one package requirement and attached to a new long term production contract with similar products being sourced at the same time. The contract was offered to a single source (strategic partner) for an extended contract life with fixed pricing, all price fluctuations managed through an escalation formula.
By amalgamating the legacy product requirements into one portfolio and attaching it to a more lucrative production contract for similar products the awarded supplier was able to maximise their purchasing power across both contracts reducing costs.
With the extended long term single source supply contract the Aero Engine Manufacturer was able to secure supply of the legacy products, maintain transparency of supply and achieve an initial cost saving of approx. £2m from a £14m contract award while minimising future cost rises through a robust escalation process. The supplier was able to future buy products against the long term scheduled requirements offsetting potential material price increases.