Automotive

Case Study: Global Benchmarking for Automotive OEM Uncovers Breakthrough Ideas for Material Cost Reduction

In order to remain competitive, an automotive OEM required aggressive cost reductions to regain profitability. But the company was struggling to generate new savings ideas internally. A.T. Kearney was engaged by the COO and CPO to look beyond their internal portfolio for next generation material cost savings.

Challenge
Traditional commercial and technical cost reduction initiatives did not go far enough. The challenge was to develop a rapid approach to help the OEM achieve world class material cost structures.

Approach
A.T. Kearney developed a structured innovation program to drive breakthrough ideas for material cost savings, while achieving world class performance. The approach leveraged competitive product teardowns to identify global benchmarks for material cost. Suppliers were engaged throughout the project to drive innovative solutions. The project team, including OEM experts and A.T. Kearney consultants, analyzed over 100 sub-systems throughout the entire vehicle. A structured approach was used to quantify the opportunities for commercial savings, specification improvement, content rationalization, and complexity reduction.

After prioritizing the best savings ideas, a cross-functional team developed the business case and presented recommendations for senior leadership approvals.

Results
The initiative drove tangible results — achieving savings targets within the first year, and identifying strategic changes required for the OEM to become globally cost-competitive in the long-term. The methodology was successfully integrated into their ongoing cost reduction program.