Strategic Sourcing of Critical Raw Materials

Client Profile

Market leader in the construction materials industry with an annual spend close to €1 billion.

The Challenge

The rising gas prices were putting pressure on the production cost of a critical material used by the client. The company was dependent on one supplier for the production, just-in-time delivery and transport of this raw material, who jeopardized the supply by cancelling the existing agreement. Current contract prices rapidly doubling in a short period. The client sought help to improve its future sourcing situation for this crucial raw material. A major challenge was setting up a long-term client relationship, while being exposed to the quickly increasing gas prices and a monopolistic market, to ensure the security of supply in a short period.

Hudicor’s Approach

Given the sense of urgency, Hudicor’s focus was on the security of supply. After mapping the internal needs, applying the should-cost modelling approach and conducting an external market research, a set of suitable suppliers was selected. By applying a hands-on approach of guiding the potential new suppliers who had no transport experience in the Western European market, Hudicor was able to ensure the supply continuation of the critical raw material while realising cost savings at the same time.

Hudicor replaced the single sourcing situation of the monopolist that used just-in-time delivery by a competitive agreement with multiple suppliers, while mitigating the supply risk by adding storage capacity and realising sustainable savings of 15% annually, resulting in a direct saving of €1 million in the first month.