Author: Vice President, Marketing strategy, SpendEdge.
Case Study Overview
| Client | Industry | Solutions |
|---|---|---|
| Automotive Manufacturing Company | Automotive/Vehicle Manufacturing, Transportation, and Logistics | Leverage Deal Benchmarking Expertise to Establish Ideal Partnerships |
About the Client:
An emerging automotive manufacturer
Client Requirement:
The automotive manufacturer was aiming to replicate successful deals across its supply chain by developing strategic partnerships with similar guidelines, expectations, and structure. Uncertain of the ideal approach, the company sought SpendEdge’s expertise in deal benchmarking to understand how to develop supplier partnerships and business relationships akin to previous successful deals.
What are the Different Types of Benchmarking in the Automotive Industry?
Deal Benchmarking:
Compares the terms and conditions of business deals to ensure they meet industry standards and organizational goals.
Price Benchmarking:
Analyzes pricing strategies against competitors to ensure competitive pricing and value for customers.
Supplier Benchmarking:
Evaluates supplier performance and capabilities to identify the best partners for sourcing materials and components.
Performance Benchmarking:
Measures key performance indicators (KPIs) against industry standards to identify areas for improvement in processes and products.
Teardown Benchmarking:
Involves disassembling vehicles to analyze components and performance, providing insights into design and manufacturing practices.
Why is Deal Benchmarking Important in the Automotive Sector?
Companies employ price benchmarking, supplier benchmarking, and deal benchmarking to align with industry standards, stay ahead of competitors, and meet consumer demands. In the automotive sector, finding the right suppliers, negotiating optimal deals, and developing strong partnerships are essential for sustainable growth and navigating market challenges.
For instance, deal benchmarking allows companies to evaluate the quality, value, and sustainability of potential agreements by comparing them with ongoing, past, or industry benchmark deals. This process enables data-driven decision-making, stronger negotiations, and the establishment of mutually beneficial partnerships. To ensure that a business deal meets necessary standards and compares favorably with benchmarks, companies must have a comprehensive understanding of relevant metrics and key performance indicators (KPIs), supported by a detailed benchmarking system.
What are the Primary Metrics in the Deal Benchmarking Process?
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Point 1
Strategic Alignment
Ensures that the deal aligns with the organization's overall strategic goals and objectives.
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Point 2
Cost
Evaluates the total expenses associated with the deal to ensure it remains within budgetary constraints.
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Point 3
Targets and goals
Assesses whether the deal meets predefined performance targets and objectives set by the organization.
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Point 4
Delivery and quality
Measures the timeliness and quality of deliverables to confirm they meet the agreed-upon standards.
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Point 5
Communications
Analyzes the communication among stakeholders throughout the deal process to facilitate transparency.
Strategic Alignment:
When selecting a business partner, negotiating a contract, or entering a deal, it is essential to ensure that all parties involved are aligned in terms of strategic approaches so that the potential business relationships can be collaborative and supportive. While comparing past deals and benchmarking prospective agreements, companies should identify the most effective strategic approaches, business plans, and decision-making methods that foster growth and help achieve their objectives.
This alignment is a critical metric during the deal benchmarking process, as it enables companies to evaluate which deals and partners will drive their growth while minimizing the risk of future conflicts. By focusing on strategic alignment, organizations can build stronger, more productive partnerships that can contribute to long-term success.
Cost:
Changing market dynamics, evolving trends, shifting consumer demands, and other factors can lead to fluctuations in costs and prices offered in potential deals. However, deal benchmarking enables companies to analyze and determine the ideal pricing and costs. The process includes gaining in-depth insights into the expenses incurred by suppliers or vendors and the prices presented during negotiations.
In the automotive industry, for example, raw material prices can vary significantly, and costs may rise due to changing government regulations. By establishing predetermined standards or benchmarks, companies can effectively assess the best approach to pricing. This allows for comprehensive comparisons between potential partners, ensuring that the chosen deals align with strategic objectives while mitigating risks associated with cost fluctuations. Ultimately, deal benchmarking provides a framework for informed decision-making, enabling companies to negotiate favorable terms and maintain competitiveness in a dynamic market.
Targets and Goals:
Finding the ideal business partner requires a clear understanding of a company’s goals, objectives, and targets. The deal benchmarking process allows companies to compare past successful partnerships, ensuring new deals meet the same standards or offer improvements.
This metric can help companies efficiently shortlist potential deals or partners and develop clear expectations, minimizing the risk of misunderstandings and miscoordination. By using deal benchmarking, companies can foster effective and aligned partnerships, driving better outcomes and achieving strategic objectives.
Delivery and Quality:
The demand for high speed-to-market, exceptional product quality, and rising competition necessitates collaborative and supportive suppliers and business partners that meet industry standards and consumer needs. When selecting suppliers and deals, organizations should compare the quality of products and services offered by potential partners. No delays, unnecessary expenses, or issues after placing a purchase order are crucial for a strong relationship. During the deal benchmarking process, companies must compare potential suppliers’ offerings with those of previous deals and partners.
Communications:
Developing and maintaining strong communication guidelines and systems is crucial in every deal, and scrutinizing this aspect is imperative for collaborative success. When choosing a supplier, companies should assess potential partners’ internal communication systems and stipulate clear communication guidelines in the deal or contract. Through deal benchmarking, companies can identify the communication practices that previously helped them achieve their targets and promoted business growth and aim to find or replicate similar systems with new partners.
Success Story – SpendEdge Advantage
Solution Offered:
An automotive manufacturer that was aiming to replicate successful deals across its supply chain by developing strategic partnerships with similar guidelines, expectations, and structure. SpendEdge experts drew upon their extensive experience of more than 18 years to offer comprehensive advice and sustainable strategies tailored to the company’s specific needs. They conducted an in-depth analysis to gain a detailed understanding of the company’s expectations and goals for potential partners. Their expertise enabled them to identify optimal solutions that not only met immediate challenges but also supported long-term growth and success in a competitive market. Their insights helped the client navigate complexities, make informed decisions, and foster relationships with partners that could align with its objectives and goals.
Outcome:
As a result, the automotive manufacturer successfully established a clear contract management plan that outlined all necessary terms and expectations for supplier relationships. This plan enabled the company to identify best-fit suppliers that aligned with its operational goals and values, ensuring a more efficient and effective supply chain. Additionally, the use of deal benchmarking provided valuable insights into industry standards and competitive practices, allowing the manufacturer to negotiate favorable terms and conditions. Through these efforts, the company was able to create supportive, collaborative, and sustainable partnerships with its suppliers, fostering a mutual commitment to quality, innovation, and long-term success. This approach not only improved procurement processes but also enhanced overall operational efficiency, contributing to the manufacturer’s competitive advantage in the automotive market.
