Raw Materials
TCO-Project to Reduce Raw-Material Consumption
Redesigned sourcing and product specifications in close collaboration with plant engineers to lower total cost of ownership through reduced material usage and strategic supplier collaboration.
Industry
Manufacturing
Direct/Indirect
Direct
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Sourcing Context & Procurement Challenge
In a high-volume manufacturing environment, raw material costs represented a significant portion of the product cost structure. Existing specifications had been developed in silos, leading to overengineering, low supplier collaboration, and inflated cost baselines. The procurement challenge was to redesign the material landscape in collaboration with R&D and production to unlock structural savings – without compromising product performance.
Procurement Objectives & Strategic Levers
The primary goal was to achieve more than 20% TCO reduction across selected material groups through a combination of specification harmonization, supplier collaboration, and demand-based optimization. Strategic levers included early supplier involvement (ESI), redesign-to-cost workshops, and make-or-buy evaluations. The initiative also aimed to reduce supply risk by broadening the dual-sourcing base where technically feasible.
Sourcing Strategy & Execution Approach
Procurement initiated cross-functional value engineering workshops involving R&D, production, and key suppliers. Together, we identified simplification potentials, re-visited agreed-upon specs with the customer, downgraded unnecessary specs, and implemented cost-effective substitutes. A strategic partnership model was adopted with three core suppliers, incentivizing them through volume commitments in exchange for co-investments in process improvements. All changes were validated through pilot runs both at the manufacturing site as well as at the finishing site of the customer before group-wide rollout.
Results & Values Delivered
The initiative delivered an average cost reduction of over 22% across the targeted material portfolio. Product performance remained fully compliant with internal and customer standards. Supplier relationships improved significantly, with two of the partners co-developing future product lines. In addition, procurement gained increased visibility into cost drivers, enabling more informed negotiations in subsequent sourcing cycles.
Role & Contribution
As procurement lead for the transformation, we initiated the TCO approach and acted as project owner across all stages. Procurement defined the cross-functional governance model, steered the value engineering activities, and conducted all commercial negotiations - always in close collaboration with R&D. We also coached internal teams on how to operationalize TCO thinking within day-to-day procurement.
Conclusion & Reflections
This project proved that TCO savings are best achieved through deep cross-functional alignment and technical openness to change. The greatest resistance was not external – but internal. Once engineering and procurement shared a unified value lens, savings became a by-product of joint optimization. The project reinforced the importance of capability-building in should-costing and design-to-value within procurement organizations.