CASE STUDY

Deal Benchmarking – Automotive Sector | Procurement Market Intelligence

Jun 18, 2021

Why is Deal Benchmarking Necessary in the Automotive Sector?

Benchmarking has become a widely acclaimed method for assessing, evaluating, comparing, and improving various processes, performance, prices, and business activities. Companies utilize price benchmarking, supplier benchmarking, and deal benchmarking to ensure they are matching industry standards, staying ahead of competitors, and meeting consumers’ demands and preferences. In the automotive sector finding the right supplier, striking the ideal deal, and developing robust partnerships is necessary to achieve sustainable growth, keep pace with the rapidly evolving market trends, and overcome the rising volume of challenges impacting their business. Deal benchmarking helps companies carefully assess and analyze the quality, value, and sustainability of a potential deal by comparing it with ongoing, past, or industry benchmark deals. This enables data-driven business decisions, stronger negotiation, and sustainable partnerships with mutually beneficial deals. Ensuring that a business deal meets various standards, and compares well with benchmarks requires a comprehensive understanding of the necessary metrics and key performance indicators (KPIs), and a detailed benchmarking system.

What are the Key Metrics for the Deal Benchmarking Process?

Strategic Alignment: When choosing a business partner, negotiating a contract, or entering a deal, it is crucial to ensure that all involved parties have aligned strategic approaches, and that potential business relationships will be collaborative and supportive. When comparing past deals, and benchmarking potential deals, companies should identify the most effective and supportive strategic approach, business plans, and decision-making methods that help their business grow, and help them achieve their objectives and targets. This is an important metric to account for during the deal benchmarking process as it helps companies compare the deals and partners that would propel their growth, with the most minimized risk of future clashes.

Cost: Changing market dynamics, evolving trends, developing consumer demands, and other major influencing factors can often cause costs and prices offered in potential deals to differ and fluctuate. However, deal benchmarking allows companies to analyze the process that helps companies and partners determine the ideal price and costs. This includes in-depth insights into the costs incurred by the suppliers or vendors, and prices offered during negotiation. In the automotive industry, raw material prices fluctuate, and costs may increase due to changing government regulations, but having predetermined standards or benchmarks can help companies assess the ideal approach to determining prices, and make a comprehensive comparison between potential partners.

Targets and Goals: Finding the ideal business partner requires a comprehensive understanding of the company’s own business goals, objectives, and targets. Through the deal benchmarking process, companies can compare previous partnerships and deals that helped them grow and succeed, and ensure that potential deals meet the same standard, or are a significant improvement. This metric helps companies substantially short list the number of potential deals or partners due to the complex, detailed, and ethically dependent nature of business targets and goals. It also enables developing clear expectations and standards from potential partners, and minimizes the risk of misunderstandings or lack of coordination between the parties at a later point during the relationship.

Delivery and Quality: The demand for high speed-to-market, unparalleled quality of products and services, and rising competition has led to an increase need for collaborative and supportive suppliers, and business partners that meet industry standards and consumer needs. When choosing the best fit suppliers and ideal deal for their business, organizations must make it a point to compare the quality of products and service being offered by the potential partner. Additionally, ensuring that there will be no delays, unnecessary expenses, or issues after a purchase order is placed is crucial to maintaining a strong and collaborative relationship. During the deal benchmarking process companies must compare potential suppliers’ offerings with that of previous deals and partners.

Communication Systems: Developing and maintaining strong communication guidelines and systems is an uncompromisable term in every deal, and scrutinizing this facet of a partnership is imperative for collaborative success. When choosing the ideal supplier, companies should assess their potential partners’ internal communication systems, and stipulate clear communication guidelines when developing a deal or contract with any party. Utilizing the deal benchmarking process, companies can identify communicative guidelines and systems that helped them achieve their targets previously, and partners that promoted growth for their business, and attempt to find or replicate a similar system with new partners.

Success Story

The automotive industry has witnessed significant change in terms of regulatory policies, technological advancements, costs, supply-demand shifts, and consumer preferences. A rising automotive manufacturer sought to help their growing company by replicating their successful deals across their supply chain. The company wanted to develop more strategic partnerships along the same guidelines, expectations, and structure, but was unsure of the ideal approach to developing the required relationships. To successfully achieve these relationships, the company chose to leverage our expertise in deal benchmarking and understand the right approach to developing supplier partnerships and business relationships similar to previously successful deals and dynamics. SpendEdge experts provided the client with comprehensive advice, sustainable strategies, and a detailed understanding of their needs, expectations, and wants from potential partners. The automotive manufacturer successfully established a clear contract management plan, identified their best fit suppliers, and utilized deal benchmarking to create ideal supportive, collaborative, and sustainable partnerships.

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