Challenges
Over the course of the sourcing project, several themes were identified leading to systemic challenges
Our client did not own the intellectual property (IP) for the hydraulic cylinders; instead, it resided with the suppliers.
The lack of IP ownership had limited the manufacturer’s ability to run competitive sourcing events, thereby leading to steadily increasing costs over time.
Part numbers were historically awarded based on short-term supplier capacity rather than strategic alignment with suppliers’ core competencies or product strengths.
The RFQ showed that incumbent suppliers were significantly overpriced; often 30–50% higher than peer suppliers within the same region.
Approach
Throughout the execution of the 7-step process, several key considerations emerged and the team incorporated them into their category strategy and recommended business award.
Most importantly, the team developed four unique part families determined by the requirement for friction vs arc welding on the cylinder rod end and material dimensions between SAE and metric. This categorization was breakthrough for the client as it was an integration of not only internal requirements but also the external marketplace mechanics and expertise. Additionally, the team prioritized the Transparent Pricing Model throughout the Negotiations step in order to control future hydraulic cylinder development costs.
Results
At the conclusion of the Claudia 7-step Strategic Sourcing process, the client team:
Developed a category strategy that segmented hydraulic cylinders by manufacturing process and key specifications, aligning each product family with suppliers best suited to their capabilities and core competencies
Recommended a dual-sourcing approach that balanced best-cost country and in-region suppliers, delivering 28% annualized cost savings.
Introduced development suppliers with low-volume, low-risk business awards to enhance supply chain resilience and build future sourcing optionality
Secured shared IP ownership for future product development, enabling competitive bidding and reducing dependency on incumbent suppliers
