Based on a structured and standardized data collection of the company-wide spend cube (which can be systematically structured in advance if needed), we conduct an AI-based analysis of the entire procurement portfolio. We use two best-in-class AI-powered analytics tools to identify concrete cost optimization measures and prepare them for supplier negotiations.
Potential levers include raw material price, energy cost, and currency analyses, as well as the identification of localization or dual sourcing potential and the evaluation of various LPP or NLPP models.
Material Costs Optimization
500+ projects
in automotive, industrial,
off-highway & more
>€4 billion
in savings delivered
>12% cost
reduction
reduction
through commercial material cost programs*
>20% product cost reduction
through integrated benchmarking and holistic initiatives*
*Examples from client projects focused on material cost optimization; average values
Industrial companies in high-cost countries – especially in Europe – are facing increasing challenges:
- Global supply chains are under growing pressure due to regional and climate-related crises;
- Trade instability due to escalating U.S. tariff policies;
- Market flooding by Chinese and other low-cost providers offering at below-market prices;
- Growing local pressures from labor costs, energy prices, and bureaucracy are threatening competitiveness.
In this environment, companies should look beyond their internal value chains for improvement potential. Material cost optimization is a highly effective lever for gaining stability and decision-making confidence – even in volatile markets.
Reduce material costs. Increase profitability. Shape the future.
In discrete manufacturing, material costs typically represent 40–60% (or more) of total product costs—making them the single largest cost driver. Optimizing material costs delivers high impact: a 5% cost reduction can boost profitability by up to 70%.
The EFESO Success Model: Three Key Dimensions of Material Cost Optimization
EFESO enables organizations to achieve strong, sustainable profitability gains with a holistic and field-proven approach. Our success is built on three key pillars:
Technology and Market Know-how
With 40+ years of experience, EFESO developed the “Best Practice Cost-Out Methodology” for the automotive and off-highway sectors. We’ve analyzed and optimized nearly 100% of the content of a modern vehicle (both combustion and electric), numerous off-highway applications, and a wide array of industrial products.
Expertise in End-to-End (E2E) Material Cost Program Execution
Our consultants apply their deep expertise in procurement and sourcing within a proven success framework. We have supported – and continue to support – clients across various industries in achieving their profitability goals. Choosing the right approach and method for each material cost program is key to maximizing results. Our experience in executing large-scale cost reduction programs across sectors has enabled us to generate substantial savings for our clients.
Execution Excellence
EFESO stands not only for strategic concepts and white papers – but for strong, hands-on implementation. Our tools and methods are field-tested, and our results speak for themselves: In recent months alone, we have delivered over €6 billion in sustainable savings for our clients.
EFESO Methodology: Two Workstreams with Up to Eight Performance Elements
Our methodology combines commercial and technical levers under structured project governance. A consistent execution rhythm, along with real-time tracking and reporting, ensures visibility into all actions and outcomes—accessible anytime, with just one click.
Commercial Workstream
The commercial workstream ensures short-term payback of project costs. The goal is to achieve sustainable price reductions through supplier negotiations by identifying a range of concrete negotiation levers. This includes the full spectrum of available options – from tactical adjustments to identifying and qualifying new suppliers, and, if necessary, executing a complete re-sourcing process.
1. AI Spend Cube Analytics
2. Sourcing Portfolio Analysis and Prioritization
We segment the Product portfolio to identify commodities with the greatest savings potential. This prioritization ensures maximum impact with minimal resource use, focusing only on strategic or high-return categories.
3. AI Target Price Analysis / Should Costing
To further support supplier negotiations, representatives of prioritized commodities undergo target price analysis or should costing. Our experienced cost engineers use bottom-up calculations to determine the true greenfield cost level of the components.
The level of detail is aligned with market needs, ensuring efficient and credible negotiation support. We use cutting-edge AI-based costing tools to support the calculation process.
4. Global Competitive Sourcing and AI-Powered Supplier Search
In addition to fact-based and cost-driven arguments, competitive alternatives are often essential for successful negotiations. To create such alternatives, we initiate, structure, and manage a systematic global competitive sourcing process – aiming to bring multiple competitive suppliers into the negotiation for each procurement scope.
This systematically increases pressure on incumbent suppliers in future negotiations.
If no, too few, or only non-competitive suppliers exist in the current supplier portfolio, we also support a systematic and AI-based supplier search.
5. Competitive Sourcing & Supplier Negotiations
After all preceding analyses and methods have been used to identify and prepare specific negotiation levers, this step focuses entirely on execution. Our Competitive Sourcing & Negotiation Convention has proven to maximize project outcomes – by combining fact-based arguments, excellent negotiation preparation, and targeted competitive pressure. Clients benefit from a measurable and sustainable impact.
Technical Workstream (optional)
For complex technical components, modules, or systems, it can be highly effective to combine commercial cost optimization measures with technical levers. This not only significantly increases the savings potential but also ensures long-term impact. Typically, technical improvements generate mid- to long-term benefits – helping to further improve profitability even beyond the duration of the project.
6. Technical Concept Battle
The EFESO Technical Concept Battle is designed to:
- Encourages early supplier involvement
- Prevents monopolistic sourcing
- Enhances supplier competitiveness
- Identifies the best cost-effective and low-carbon technical solutions
All suppliers participate under equal conditions, improving solution comparability and compliance.
7. Design-to-Cost / VA/VE
Our approach brings structure and accelerates the development of technical cost reduction measures. A key differentiator is our EFESO Fresh-Eye Approach, which, combined with integrated Should Costing expertise, enables a true outside-in perspective.
This allows our clients to benefit from independent idea generation by EFESO’s R&D experts. Cost optimization impacts are assessed more quickly, enabling immediate, cross-functional discussions in downstream Design-to-Cost (DtC) workshops with client teams – significantly accelerating the evaluation and implementation process.
Instead of merely collecting and re-packaging existing ideas from within the client's organization, we generate real added value. Selected suppliers can also be involved in the process, or entire cost optimization projects can be conducted jointly to tap into their innovation potential.
8. Concept and Supplier Cost-Down Workshops
Cost reduction opportunities often lie not only in the product or component design, but also within the supply chain. EFESO’s Supplier Cooperation Workshops provide a joint framework for making end-to-end supply chain costs transparent and closing gaps to best practice.
Relevant suppliers are actively involved and informed about the scope and objectives of the program.
Each workshop is tailored, actionable, and focused on measurable cost reductions. Workshops may be held in person or remotely and include joint negotiation and implementation planning.
Our solution portfolio for purchasing organizations
Functional & Category Strategy
Indirect Procurement
Material Costs Optimization
Procurement
Negotiation & Awarding Management
Performance Diagnostics
Supplier & Value Stream Optimization
CASE STUDIES & INSIGHTS - PRACTICAL EXAMPLES
ESG strategy with measurable results
CASE STUDY:
A leading automotive manufacturer wants to make its procurement sustainable and measure progress through KPIs. But the goals cannot be achieved via the purchasing side alone - the company needs a company-wide ESG strategy.
Big Data
INSIGHT:
Learn how ‘Procurement Spend Cube Analytics’ can help you quickly identify savings potential in procurement.
Next Level Negotiation Results
INSIGHT:
Find out more about how you can identify and tap into savings potential with our best-practice toolset for negotiation and awarding management.
End-to-End Claiming Process
INSIGHT:
Read here how EFESO’s team can help you to professionalize your receivables management and make your organization more agile and more resilient to phases of inflation/deflation.
Profitability Improvement via Change Management
INSIGHT:
Driving profitability through change:
With its Commercial Change Management Process (CCMP), EFESO helps Tier-1 suppliers in the automotive industry align pricing, cost, and customer demands – for measurable results in a dynamic transformation environment.
Supply Chain Resilience
INSIGHT:
Learn how to increase the resilience of supply chains while maintaining profitability. We describe a best practice EFESO client case from the automotive industry. Additionally, we name the key initial questions for four central fields of action and essential steps on the path to resilience.
EFESO’s M&A competence
INSIGHT:
Activate these and other value levers within your M&A project. Explore our insights on what truly matters during due diligence and integration. Rely on EFESO’s experience to accelerate execution, achieve strategic goals, and secure a competitive edge in today’s fast-paced market environment.