Quantzig Reduces Procurement Costs by 6% for European Manufacturer with Predictive Analytics 

Business Challenge

A European industrial parts manufacturer with a multi-billion dollar market capitalization faced the dual challenge of high competition and escalating production costs. The client aimed to reduce production expenses by minimizing raw material costs. However, the complexity of their product portfolio, coupled with low purchasing quantities, resulted in a lack of highly competitive bids from suppliers.

Escalated Production Costs

Complex Supplier Management

Unpredictable Cost Drivers

Additionally, with suppliers spread across the globe, it became increasingly difficult to predict various cost drivers and identify potential increases in cost in advance. The client required a solution that could forecast material costs and provide timely alerts to stakeholders about potential alarms.

How Quantzig Helped:

Quantzig began by developing a comprehensive framework to segregate various cost drivers contributing to the final material cost. This framework provided a structured approach to identifying and understanding the key factors impacting material pricing, laying the groundwork for predictive analytics.

Following this, Quantzig built a system-dynamics-based solution capable of forecasting the values of these cost drivers. This solution simulated the impact of these drivers on the final material cost, enabling the client to visualize future scenarios, using which the client was able to negotiate more effectively with suppliers.

To further enhance the solution, Quantzig implemented an alert module designed to notify the client in advance if the forecasted cost of any material exceeded predefined thresholds. This proactive system ensured stakeholders could address potential cost escalations promptly, minimizing risks and enhancing procurement efficiency.

Results & Impact

The initiative led to a 6% decrease in procurement costs, optimizing sourcing and procurement processes. Additionally, 11% improvement in cost savings was realized through proactive recommendations, which significantly boosted overall financial efficiency.

Moreover, the approach enhanced tracking and updates, improving monitoring and enabling more accurate, timely updates. This ensured better decision-making and resource management, contributing to overall business success.