cost modelling and benchmark pricing for a large European retailer
Declining sales prompted a range review that aimed to increase revenue through product innovation. Procurement was challenged to manage product costs to ensure profitability whilst meeting quality expectations.
Following detailed analysis we focused on improving and standardising specifications – using cost modelling and benchmark pricing to support supplier negotiation.
We used our tool to analyse and identify margin dilutive products. Specification was identified as the most effective lever for negotiation.
The supplier was omitting an appreciating Turkish Lira against USD (our client’s payment currency). The supplier was gaining up to 27% on FX which more than compensated for the loss driven by the increase in cotton prices.
- Savings delivery of ~ €200K
- Designed profitability into new products
- Product cost optimisation of approximately 18%
- Improved time-to-market speed
- Greater visibility of key cost drivers and supply risks