INDUSTRY: Heavy Truck Manufacturing
SERVICES: Cost Gap Analysis & Supply Chain Optimization
Situation.
A leading OEM truck manufacturer faced significant price increase claims from a key wiring harness supplier with facilities in three different countries across Eastern Europe and the Middle East. These claims were driven by stated increases in production costs and market condition changes such as inflation and transportation, however constant “fire-fighting” undermined operational excellence and continuous improvement at the supplier. The OEM needed a comprehensive understanding of these cost claims to negotiate effectively.
ACTIONS.
- Evaluated the supplier’s actual production costs across different facilities.
- Benchmarked these costs against existing contractual agreements.
- Scrutinized the supplier’s rationale for extra claims beyond the agreed costs.
- Developed an optimized cost model reflecting best practices in supply chain and operations.
- Identified discrepancies between current and optimized costs and devised a plan to bridge these gaps, including necessary capital expenditures.
Result.
- Achieved a clear, fact-based understanding of the cost structure.
- Seraph validated an overall increase in costs amounting to €10.8 million, with €6.4 million attributed to manufacturing/labor and €4.4 million to component costs, against the supplier’s claim of €7.7 million and €5.3 million in these respective categories
- Prepared for negotiations with a detailed analysis of current vs. should-cost scenarios.
- Outlined a strategic plan with 15 work packages for cost optimization and operational improvements, Seraph identified €7.8 million in opportunity to offset the validated increases in cost.
