While a number of companies are tackling the complexities of the ’indirect’ tail, the same cannot be said for direct materials – until now.
In this episode of AOP Introducing… Yushiro Kato, CEO and Co-founder of CADDi, shared how they are building a completely new approach to sourcing for low volume direct material components.
Yushiro and his co-founders had significant experience in buying direct materials, but always encountered challenges when comparing internally generated cost estimates to the prices they were able to negotiate with suppliers. This may have been a result of problems with the accuracy of internal cost models or because suppliers were not prepared to negotiate on cost, considering their cost models to be proprietary. These are challenges I faced every day when buying a number of different products within the automotive industry.
The approach is as follows:
- CADDi has developed software that automates the should cost modeling process.
- They have built a ‘virtual’ manufacturing footprint where they not only vet but reserve manufacturing capacity at a network of over 600 suppliers. Pricing is pre-negotiated with each supplier in their network.
- Their AI will automatically match the most effective supplier based on an engineering drawing.
- CADDi has a network of over 300 manufacturing experts placed across their supplier network.
- As a managed service, CADDi retains accountability for all cost, quality and delivery performance.
Yushiro shared in our conversation that CADDi is working with 70 percent of the manufacturers in Japan, and are now expanding across the U.S.
I’m fascinated by the model, and I’m looking forward to digging into it further on the Art of Procurement.