Understanding hidden costs
A multinational chemical company used WTP to gain transparency into product categories where suppliers did not share cost breakdowns. During a one-week pilot, the team developed and tested cost models that enabled more fact-based and balanced discussions about cost drivers with suppliers. This approach led to over €200,000 in savings, improved pricing agreements, and the global adoption of WTP for both specialty and basic chemicals.
Introduction
A multinational chemical firm wanted to understand the costs of products they didn't have clear information on. Some product groups were unclear to them because suppliers didn't share the cost details. This left these categories less managed than desired.
The company was in pursuit of insights into these cost structures to better understand them and to enhance their discussions with suppliers.
Approach with WTP
The Procurement Center of Excellence team from the chemical multinational approached WTP for a demo.
The feedback received was positive, highlighting the system as pragmatic, and user-friendly, and praising the intriguing setup of the cost model. Also, all their required commodities were included.
Subsequently, a one-week pilot phase was initiated. Spearheaded by the Centre of Excellence team, along with five purchasers representing all global regions, they developed 10 cost models for previously "unknown product categories". These models were not only formulated but also put to the test in real-world supplier discussions. The results were
transformative! The team could delve deeper into various cost drivers during their discussions with suppliers.
This approach enabled them to engage in more balanced and
detailed conversations about the different cost drivers.
Concrete Results
This approach transformed the dynamics with all five suppliers. Grounding discussions in concrete facts and figures elevated the negotiations. With three suppliers, this resulted in price adjustments, yielding an initial saving of over €200,000.
Four suppliers agreed to maintain price discipline, establishing new terms for future price fluctuations based on shared information. One supplier hasn't yet aligned with this approach, but they know what's coming in future discussions.
The multinational chemical company began using WTP for both their specialty and basic chemicals.
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