Case Study: How an experienced China importer saved 15% by price-benchmarking

 

Background:  A large European kitchen products manufacturer suspected they were not getting the best cost from their existing suppliers. Traditionally, agents were utilized for their Chinese buying, and they were not able to secure better pricing.

In order to go direct with suppliers they utilized CPG to forge direct relationships and negotiate better first costs to streamline their supply chain management in China.

Challenges: 

• Traditionally the China segment of their China supply chain was managed through the use of agents to do their purchasing
• As a Lithuanian company, they feared they did not have the capability to communicate directly with suppliers.  
• Without vision into the Chinese market and the ability to communicate directly with suppliers, they did not have full transparency of the China segment of their supply chain.

CPG’s Beijing-based team was commissioned to communicate directly with suppliers on their behalf, negotiate better pricing and outline their needs and vision.

Results:

• After multiple rounds of negotiation, CPG was able to save the client up to 15% on certain items and between 5-10% off their actual target price
• Additionally, after analyzing the supplier’s container load method, we were able to optimize a best-fit method, which allowed them to load more product into each container providing additional cost savings.

-Original capacity – 350 cubic meters

-New capacity – 460 cubic meters

• Raw material websites in China were summarized for their review and future utilization, allowing them to track material cost versus product cost from suppliers giving them ongoing insight into the Chinese market

Conclusion:  

Chinese suppliers are almost always open to negotiation and prefer working directly with their clients in good faith. When looking into cost savings, it is important to analyze every cost aspect involved in getting the goods from the supplier factories to your warehouse.

Lessons Learned:

• Often, negotiating a better cost from your supplier can be a fluid process. It may take multiple rounds of negotiations to secure the best cost the supplier is willing to provide
• Attention to detail can provide additional value. In analyzing the load method we were able to provide a result that was not even on the client’s radar. Having eyes and ears on your supplier is critical to an optimized supply chain
• Knowing product cost from suppliers is only one piece of the puzzle. For sustained success, it is critical to understand the market from an organic level to work, communicate and negotiate with suppliers confidently