Cost Model Analysis: How SpendEdge Helped a Prominent Automobile Engineering Client Achieve Substantial Savings
Overview of the Automotive Industry Amid the economic crisis, the automotive industry is witnessing a constant change owing to the increasing environmental concerns and the rise of new players. The industry is investing highly in R&D to introduce emission reduction technology and autonomous vehicles into the existing service architecture. Moreover, leading automobile engineering players are […]READ MORE >>
Overview of the Automotive Industry
Amid the economic crisis, the automotive industry is witnessing a constant change owing to the increasing environmental concerns and the rise of new players. The industry is investing highly in R&D to introduce emission reduction technology and autonomous vehicles into the existing service architecture. Moreover, leading automobile engineering players are planning to re-define their production lines to stay competitive and achieve higher pricing power. The growth of the automotive space can be attributed to factors such as declining interest rates, easy finance options, and robust government incentives to promote the car culture. In addition, factors influencing the growth of the industry include:
- The presence of stringent regulations: The automotive industry is witnessing an increase in regulations with respect to environmental and safety standards. Prominent automobile engineering players are facing challenges to develop alternative powertrain technologies for lower-emission vehicles. Hence, it becomes essential for automobile engineering players to invest highly in research and development to improve their ROI.
- Digital demands: Today, with the radical shift toward digitization, digital channels have become the primary information source for the customers. Also, the rise of online purchasing is paving the way for relentless competition from online retailers; which makes it essential for businesses to revamp their existing product portfolios.
The Business Challenge and Our Journey
The client, a prominent automobile engineer with a revenue of US $2.1 billion, wanted to understand the market scenario and identify the key cost elements. The client wanted to conduct a cost-model analysis to evaluate all the potential costs and revenues and assess the impact of each cost driver on the overall cost of the services. Moreover, with the help of industry best practices, the client wanted to identify the gaps that need to be bridged to further improve their cost efficiency. The primary concern of the automobile engineering player was to compare the costs of their services with that of the competitors and allocate their resources accordingly to meet the business requirements.
To identify the best negotiation levers, the cost model experts at SpenEdge carried to a robust research methodology. The methodology comprised of interviews and discussions with prominent stakeholders in the automobile engineering space. To recommend on the lowest cost mix, the experts also compiled information from reliable sources such as trade shows, company presentations, and newsletters.
The cost model analysis solution offered by SpendEdge assisted the client in identifying the direct and indirect costs, intangible costs, and the cost of potential risks. Moreover, the client was able to conduct quantitative cost modeling and scenario-based cost modeling to understand the best negotiation levers and recommend the lowest cost mix.
Fundamental questions answered in this cost model analysis include:
The engagement offered by SpendEdge helped the automobile engineering client perform trends, challenges, and opportunity analysis to compare the cost of all elements and determine if the benefits outweigh the costs. The automobile engineering client was further able to develop a cost movement forecasts for all cost elements to achieve better pricing results.
To know more about our cost model analysis solutions