Challenges
The client had historically carried-over a sensor from one product to another and would periodically adjust the housing, positioning or sensitivity (via software) in the different products and applications. Additionally, the client would procure off-the-shelf sensors in some products/applications and then highly customized solutions in other products for a similar application. The lack of a strategic approach to sensor selection, including type, technology and level of customization, made the historical sourcing of this technical category difficult for the purchasing organization.
Approach
During the Negotiations step, semiconductor visibility was added as a specific focal point for discussion with the supply base. Suppliers agreed to share semiconductor content information to allow for obsolescence or component shortage tracking as part of an overall risk management strategy the client was embarking on.
During the Supplier Selection process, sensors were grouped by sensing technology type and given a designation of either Commercial-Off-The-Shelf (COTS), Customized COTS, or Highly Engineered. This guided the team as they prepared the category strategy and associated business award while also providing a clear implementation roadmap based on the grouping of the sensors.
Results
The team realigned the supply base according to sensor technology type and the client’s customization requirements. This coupled with the rationalized supply base, based on both price and non-price benefits, led to a streamlined future supplier list. The team achieved over $14M in annualized cost reduction.
