Procurement. You have come to the right place. Without further ado, I would like to introduce our panelists for today's session. There's myself. I run research at Spend Matters. If you're not familiar with us, we'll get to that on the next slide. Yeah, my background's 35 years in supply chain. Actually, way back in the day, decades ago, I helped found the Engineering Data Management newsletter before it became PDM and then PLM, and I've been in this space for a long time and really excited to see it grow and excited to have our two panelists today. With me is our lead analyst, Bertrand Maltaverne, who actually covers direct material sourcing and many other areas as well. Bertrand, you want to just give a little quick intro of yourself?
Yeah, sure, sure. Thanks, Pierre. So I'm Bertrand, one of the analysts at Spend Matters, covering upstream mostly. The topic of direct procurement is very close to my heart. I used to be a buyer ages ago when I still had hairs and stuff. A long time ago for a large Fortune 500. That's why I'm always very passionate about direct spend. Looking forward for that discussion with Imran Sheikh. Imran?
Thank you, Bertrand. Thank you, Pierre. Good morning, good afternoon, good evening, everyone. My name is Imran Sheikh. As of now, I represent myself as the Head of Samsung SDS Cadencia Team, a platform which focuses really on direct procurement solutions. I have an experience of almost 16 and a half years in this industry of source to pay and design to source. So really excited and fortunate to be on this meeting, on this panel with two really great members. Thank you.
Awesome. Really looking forward to it. We'll go to the next slide. It's funny. You can read about Spend Matters. Yeah, we're kind of a best-of-breed analyst firm. We focus very deeply on procurement. In Direct Procurement, that means supply chain, and it also means integration into PLM, and obviously integration into finance and into the business, right? We'll be getting into that. By the way, Bertrand is kind of downselling himself. He was an ex-chair and a really deep practitioner and has actually done this in the field. Really, and Imran, a lot of great expertise and a really dark horse provider in the space. I actually didn't really know how deep they were until we actually went and benchmarked them. That is kind of what we do. We benchmark technology solutions and kind of supply-side tech solutions.
We have a whole on our website. If you go to direct material sourcing, we have a whole persona focused just on this area as well as other areas. We have a whole guide, and you can learn all about it and go into it. Let's get into the topic without any further ado. Let's get into it. I'm just going to say one quick word. I've been in the space for a long time. Back in 2000 or so, when I started kind of the first procure tech analyst, the first study that I did was actually in e-sourcing, and it was actually focused very much on direct materials. It is a very complex space. This is not just your average indirect sourcing solution.
It is good to see that the market has evolved since that time. Without further ado, I'll pass this over to Bertrand, and he'll tell you all the good, the bad, and the interesting of the space. Bertrand, I'll hand it over to you.
Thank you, Pierre. Yeah. What I want to do before we deep dive into Samsung offering, I think it is important to set the stage in terms of direct materials. As you said, Pierre, it's very specific. It's very special. What I want to do is really go through a few things around why direct materials is different. Then we'll go around the opportunities, what the opportunities are when you address direct spend properly, and basically the challenges to overcome if you want to get there. Direct spend is different, as you see on the slide, for one reason. It's direct spend, meaning that it's stuff that you buy that goes into your product. As these McKinsey studies have shown here, there is a strong correlation between the performance of the launch of new products and your company's performance in terms of revenue and profit.
The better you launch a new product, the better health has your organization. Obviously, it's the good, but there is obviously a risk that if you mess it up for whatever reasons, and there could be many reasons, we'll see some of them later on, that can have costly consequences for the company overall and not just for the procurement organization. McKinsey estimated that in the automotive industry, a delay in launching a new product of, let's say, around four months could be reaching a $2 billion cost impact for the company. That's one reason why direct spend is different. It's the direct connection between what you buy and what you sell. If we go to the next slide, that direct connection is also very clear when you think about disruptions overall. The last weeks, months, years have been full of disruptions.
We live in a permanent state of crisis, and people have named that perma-crisis where VUCA, so volatility, uncertainty, complexity, and ambiguity. It's basically the new norm. If you remember a few years ago with the COVID crisis, everything was around supply disruption because goods were not moving from a country to the other. Even the cheapest components, like a chip that goes into a car, as illustrated by that quote from Mercedes-Benz, not having that chip that cost, I don't know, a cent was preventing Mercedes to put a car that costs much, much more on the market. More recently, we've heard about the tariff and all the uncertainty and volatility and the consequences that these changes in the geopolitical landscape have induced.
It is because there are really global supply chain and that dependencies between those value chain countries, suppliers, et cetera, can have really a dramatic ripple effect. At the end of the day, all these supply chains that are very global are also very fragile because of years and years and years of over-optimization for low-cost with practices like low-cost country sourcing, meaning that reliance on, let's say, China, for example, or some other areas in Europe or South America, just in time, et cetera, et cetera. The way forward, it's really to consider, take a step back and really consider design for supply as a way to design product and the supply chain.
It's not just about the design of the product in terms of what it does, how it looks like, et cetera, but it's also designing the supply chain that will be key to deliver that product to the customer. To design that in a way that embeds resilience and makes your organization anti-fragile and with the ability to survive and even benefit from shock. That's one thing I wanted to illustrate. The next slide is about another aspect that is key, and that is not new, actually. There are a couple of studies that are years, like 50-something years old, that show the importance of having the new product development or new product introduction be robust because this is at that stage that you can create or destroy a huge amount of value.
Like there is, in the 1960s, Dow Buddy the study where they said that 80% of product cost is basically set during the 20% of activities that happen during design and development. There are other studies around the 1990s that do actually show the same is that early stages, early design phases, this is where you have huge opportunities. If you mess it up, you're going to create luck in, and it will be super hard to go back and change because of different things, qualification of the parts, qualification of the product, and some other consideration. At the end of the day, the next slide is all about packing that up into a wave of opportunities in terms of the strategic imperative and the key capabilities that go with it.
At the end of the day, the idea is to try to combine and merge through this design for supply discipline we've talked about, the demand, so the customer side of things, the supply, what you buy, and your product so that it's not, like in terms of Venn diagram, not three independent bubbles, but something that works closely together by integrating those processes in terms of design and product, enabling the design for supply, having supplier-led innovation so that you can benefit from innovations, support ESG mandate, and build that network, that supply network that will deliver, that will participate to having the goods you need to build your product and ship to your customers in the most robust way. That's easy to say, but there are a bunch of challenges.
The next slide is about the first one, is that NPD or NPI, so New Product Development or New Product Introduction, just like creativity, it's super messy. I mean, try to understand what creativity is about. If there was a process to be creative, people wouldn't do it. I mean, the theory with some kind of like the Double Diamond design process is something that has been studied and developed as a framework to lead to innovation. At the end of the day, when you think about the reality, it's more messy, like the right side of the slide, where you have to iterate, change, redo, et cetera, et cetera. Actually, Imran, I'm curious to understand your perspective and especially your customers and prospects, how they see how they have their NPD or NPI under control if they do.
Of course. This is such a good slide. The process of really what's happening and actually when they go into play and start on their NPD and the NPI processes where customers start feeling, well, there is so much of collaboration needed. Organizations feel like, well, there are departments, there are internal workflows. In my experience of working and closely monitoring use cases with customers in the high-tech, automotive, and even consumer brands, the reality is very much close to what you just said, what's shown on the screen.
Yeah, yeah, that's for sure. We have a lot of iterations. The more you want to involve an extended ecosystem within your organization, but outside of the organization, the suppliers, there could be also some other partners, the messier it becomes. That's one element you have to have in mind that to achieve this value proposition we talked about, you have to understand that things are messy. We need a solution to manage that mess or minimize that mess. The other element with the next slide that is also a challenge is that direct materials management is often very siloed. The thing is that that does not work really well because you have a relationship, as I said, with multiple internal and external partners. I mean, internally, you may have R&D, quality, manufacturing, logistics, procurement, obviously, so many functions.
At the end of the day, if you want to involve external partners like your suppliers or their institutions, then things start to be messy. Understanding exactly what each wants starts to be pretty complex. The other element in terms of silos and complexity, it's all about processes, the part in the middle. Very often, as we said, the process is messy. When you think about launching a product from the design phase to the industrialization, start of production, and even until the end of life, you have so many activities, so many sub-processes involved that it's very, very complex. To make things even worse, it's not a complex landscape of processes, but it's also a very complex process of systems. People often refer to spaghetti-like systems. I really love spaghettis and stuff, but when you eat spaghettis, it's messy.
That's kind of the same here. At the end of the day, it's important to consider those things to manage that and make the right choices because, as the next slide shows, too often, companies are trying to use one tool for everything. When I say everything, it's indirect and direct, when at the end of the day, it's really around using the right tool for the right job, right? As we said, as I've tried to say, actually, at the end of the day, there are specificities in direct that make so that a piece of tech needs to support them. Not every tech, and especially the one that is mostly done for indirect, will allow you to do that and address that.
To recap with the next slide, and before going deeper into Samsung's offering there, yeah, direct material management is very different. There is a direct impact in terms of the procurement process and the performance of the organization or the company in terms of revenue, margins, and customer sat. We've seen that whatever decision you take early in the design phase before actually starting to produce the product can drive to lock-in, so value destruction, and a huge part of it, 80%. Obviously, there is post-Start of Production, the whole life cycle, because at the end of the day, NPI, NPD, production, maintenance, services, and disposal are all steps that require continuous improvement, value engineering, and changes that are about a contribution of procurement.
Looking forward with the next slide, going back to that vision I've used before of the demand, so your customers, the supply, and your product, it's all about making that work nicely together by integrating sourcing with design and product development, enabling this design for supply, thinking about design, not just about the form and function of the product, but also the supply chain design, because that's what's going to, at the end of the day, impact your ability to deliver. Integrate suppliers because they are a great source of innovation, supporting sustainability and other governance principles, because there is no way you can avoid them. That needs to be built in into your design and all the product and the supply chain.
Having also a design that takes into account the things that things will change over time, so it needs to be agile and adaptable, meaning that in terms of capabilities in your tech, you need to have a tech that's going to be what I call product and supply aware in terms of products or Bill of Materials, parts, and costs. It needs to be demand aware in terms of understanding what are the projects coming, what are the recurring needs. It needs to be supply aware in terms of it's not just about my needs, but understanding the market drivers and everything that's going on in the supply market in terms of risks and prices, et cetera, et cetera. A solution that will also support orchestration. Orchestration, it's all about it's not just about tech and connecting tech through interfaces.
It's really orchestrating people, process, and tech within your walls of your organization, but also the extended supply network that represents your organization, the suppliers, maybe the suppliers of the suppliers, and a much larger ecosystem of partners. That being said, Imran, now maybe take us through your approach at Samsung SDS to address those challenges and the type of capabilities you can deliver.
Thank you, Bertrand. That was such a clear depiction of the direct materials management process. In order for me to explain the Cadencia Platform's capability to address these concerns and issues, let's talk about these challenges a little more in detail and at a very high level, at a quick four-point level. Typically, when we talk about direct procurement and direct materials management, it's about price competition, which is squeezing margins, especially because it's direct materials. Product life cycle, which keeps on reducing as we keep on inventing new products, trying to keep up with the competitors. Of course, the regulatory expectations with the ESG sustainability and those respective requirements that we have to qualify suppliers for so that we can source the best one from the best ones.
Last but not the least, keeping track of the constant changes in the Bill of Materials that companies have. In the end, when you look at these four different challenges for an organization's procurement and engineering and sourcing team, it basically means hitting a moving target, blindfolding. Let's move on to the next slide where we speak more about what can Cadencia do here. What we saw as a gap after speaking with a bunch of customers and having experience in this industry, specifically for Samsung SDS Cadencia customers in various locations and various areas, but most importantly, in the automotive, high-tech, and consumer goods. A very key gap was that procurement was basically getting involved at a much later stage of the entire designing process, which means any inputs or any involvement from the procurement side would basically mean changing the design from scratch.
That's what Cadencia does at the very basic level. It helps you overcome that issue by involving your procurement team, your sourcing team much earlier in your designing process. Let's move on to talk more, the next slide. Within Cadencia's design to source platform, we have solutions which cater to specific customer needs. Over here, we talk about a global high-tech company specifically focused on BOM Collaboration. BOM Collaboration, not just between this high-tech company and its design manufacturers, but also its internal stakeholders. The company, as you can see at a profile level, basically manufactures laptops, computers, servers, and has employees across the globe. These employees are key stakeholders from different departments. The challenges which this company faces are very much similar to what we spoke earlier on my previous slide, fragmented collaboration across product life cycle.
Without enabling real-time collaboration among stakeholders, this company was constantly coming into a pothole where they would say that, "Okay, how do we move forward? We don't have any involvement from procurement." If we transition this out from the R&D phase to the procurement team now, it basically means it's going to come back with a whole bunch of feedback. The audience, who are basically the original design manufacturers, basically were receiving all the information over emails and Excel files and spreadsheets. Imagine those same Excel files being updated, edited, and sent back to this high-tech company, the engineering team and the procurement team. Imagine the burden of comparing those different Excel files together to keep track of multiple versions, leading to redundancy, inefficiency in the overall process.
In the end, the inefficient BOM version tracking and the sourcing and market data gaps basically led to this company resulting in very delayed go-to-market strategies. The product life cycle was increased because the product was introduced in the market at a much later stage. Let's move on to talk more. What could Cadencia do here? With Cadencia's design to source capability, we could bring in our sourcing module much earlier in the BOM collaboration process. Within Cadencia, you have the ability of uploading your Excel-based BOMs or your BOMs coming in from your PDMs or your PLM systems directly through integration within Cadencia. Our system supports Excel-based templates where you can simply upload those templates, mark those respective column headers, and convert them into online templates, which your stakeholders internally and externally from your ODMs can easily collaborate and participate on.
What this immediately resulted in was reduced material costs. Because now the sourcing team and the procurement team were basically coming in much earlier in the designing process, collaborating with the ODMs and telling them that based upon previous history and previous records, previous purchase orders also, there were the same items available with a much lesser cost. There are different suppliers available with a more compelling performance need with respect to sustainability, ESG, and other tracking purposes. In the end, this resulted in this high-tech company accelerating its time to market value. Imagine that this company is delivering laptops by launching new laptops, new versions, new updated profiles of those laptops at the end of 12 months by going through that previous cycle of constant back and forth between design and engineering and, of course, the procurement team. That cycle was reduced by three months.
That company, on a hypothetical basis, had an annual revenue of $12 million for that specific laptop version. Those three months basically resulted in an increased increment of $3 million for the same company. Let's move on to the next slide and see what exactly happened. This high-tech company with a unified BOM collaboration process, integrating with different systems, including Excel files, and of course, letting your different teams collaborate on those BOMs and compare those different versions on a single screen by simply having the Cadencia Platform flag out what has been modified by this specific entity, this specific supplier, this specific internal stakeholder. Accordingly, you can take a decision. This decision-making process was basically eliminating all the silos between engineering, procurement, and quality teams. In a way, coming back to its bottom line of reduction in time to quote, reduction in time to market.
Let's move on and talk more about Cadencia's capabilities.
I just wanted to, sorry to interrupt, Imran, just on these capabilities. I just wanted to emphasize the fact that this ability to collaborate with suppliers or any third party on BOMs and product structure is for me a key element because it goes back to what you said about your customers in the tech industry, but what I was saying earlier in terms of that process being messy. A lot of organizations want to drive supplier-led innovation, but most tech, and especially procurement-focused tech, are not really able to support that. I see a lot of tech that exists in procurement. It's more what I describe as one-way streets where procurement is pushing stuff to the supplier asking for a price, asking for a PO confirmation, or whatever you want. It's mostly one-way where me, buyer, ask you, supplier to do this.
What you have and what Imran has described, it's really about an intimate relationship with those third parties so that they can come with ideas on the product, propose them into the BOM, and you can see that and compare what supplier one, two, or three have for design and analyze the different options and then make a decision on, "Let's go that route." It is really about co-development and supplier-led innovation, which is, I think, a lot of people talk about it, but very few actually do it, and especially because of what is available on the market from a tech standpoint. I just wanted to emphasize that. Sorry to have interrupted you. Imran, you can go on.
Very valuable point, Bertrand. In fact, that's the core basis of one of our key parameters, that how do we enable that effective collaboration for ensuring the most effective design making, the collaboration so that designing teams are not just working in silos. Immediately, when a successful use case happens, the next use case is automatically built up. A use case where our same companies who could now collaborate more effectively with their suppliers, with their manufacturers and internal stakeholders, now they came back to Samsung SDS with another question, which is how to save costs. Because for us, there are two important questions, which is how do you manage these costs and how do you estimate these costs? Which also links us to one of the questions in the chat, which is how are those different cost elements taken into consideration when we talk about BOM collaboration?
Because it's not just about version tracking of BOMs, collaborating with different stakeholders, getting their version of our different parts, components, subcomponents, assemblies, sub-assemblies. It's also about identifying and noting down the most appropriate cost elements. That's what we see on the next screen. Within Cadencia, which is the platform catering to design to source needs, having said that, Cadencia is a platform which focuses not just on design to source, but design to source to pay. Our flagship functionality over here is design to source, which focuses mostly on direct materials management and which has some key tools. One of them was BOM collaboration. The other one is product cost management. In product cost management, what the system does is it basically answers those two questions. When you estimate cost, how do you manage that cost over the entire life cycle?
That is what the BOM management and the product cost management system do over here. It enables your engineering team, your R&D team, to come up with a model which is then sent to your procurement teams who come up with the appropriate cost for that specific model. Think of the Samsung Galaxy S24, a mobile phone. When that was launched, it was successful. Customers used it. People had feedback for it. There was a chance to improve it. That is how the company built its new product called Samsung Galaxy S25. When they were building the S25, the company thought of a simple use case. Okay, based upon the feedback, our customers, the end users, want better speaker quality. In order to do that, I need to develop a total cost model.
When they do that and compare that to the S24 model, there's a huge gap because the design components are now talking about including additional specifications, changing the size of the phone, adding new components in the phone, which increases the overall cost. There goes the process of how can you go across multiple stage gates? Because apart from cost management, you can also do within Samsung Cadencia cost modeling, what we call as cost estimation, and in the market called as should cost modeling, you can estimate how can different cost parameters affect my total cost of the entire product. How can I take specific assemblies of the entire product and go to the market and find new suppliers? These are pieces which are catered to across multiple stage gates, which are also catered within the Samsung SDS Cadencia Platform, apart from BOM collaboration.
If I move to the next screen, it basically speaks about when you are taking into consideration the initial cost coming in from your previous phone model or your laptop model or your previous car model, or in some of our customers' cases, even the previous makeup model that they had, and they want to improve on it. They will have the ability using Samsung Cadencia's platform and the sourcing platform's AI quotation analysis to compare the initial bids, the best cost, and the differences. This is the best cost coming in from third-party market sources. This is the best cost coming in from your internal cost models. This is how the Samsung Cadencia model helps you identify what could be the appropriate difference.
Do I need to go back to my best possible manufacturer and ask them to negotiate the prices for me, or do I simply source it from my other market and ICS provider? Let's move on to the next slide. Detailed cost estimation is what specifically Cadencia takes into consideration when customers come to us and talk about how do we manage and estimate cost. Strategically breaking down the entire cost because your BOM information basically contains multiple items. These multiple items could be your assemblies, sub-assemblies, components, sub-components, and so on. When you break them down strategically, you now have the ability of simply leveraging your historical learnings from previous sourcing events, existing contracts, past purchase orders, which are obtained, and then you can estimate your cost.
The RFQ quotation analysis within Cadencia, as you can see on the very first line over here next to commodity tab, or the very first row over there, it basically helps you analyze your vendor quotes. It's simple when you talk about indirect procurement and analyzing quotes across multiple suppliers because you're talking about a few hundred, maybe a few tens of items. Over here, we're talking about line items going into that specific product. Talk about a car. Talk about a laptop. Thousands of components going into it. Then analyzing the price difference and doing a should cost modeling on that part is not just time-consuming, but it basically has a lot of error issues, manual intervention.
Cadencia's RFX quotation analysis, along with our material cost-based estimation tool, basically overcomes that entire issue, overcoming the time limits, overcoming the specific issue of figuring out what's the best possible alerting mechanism to identify the cost differences, the supplies capability differences, the sustainability differences between my previous model and my current BOM Version. All of this and using different manufacturing methods in the industry basically helps Cadencia's platform really stand out in the market. That's what we get as feedback from the customers, that we do this very well as siloed processes. When we start collaborating with different stakeholders, it's impossible for us. We start looking at integrating multiple modules together from different vendors and also talk about Excel integration. With Cadencia, you simply negate all of that. Let's talk more about that using some examples on the next slide.
This is another customer success story where we talk about the target cost management. This customer specializes in building and creating and manufacturing seats and powertrains for cars. They're considered as one of the top 30 global automotive suppliers, not just supplying to specific Samsung SDS Cadencia customers, but also to other companies in the global market, in the German automotive market, but specifically using Cadencia to manage their incoming needs. This specific organization had a very siloed NPI process, a process which Bertrand Maltaverne touched upon strongly in the beginning. That resulted in usage of BOM data formats by different stakeholders, by internal external stakeholders. When it comes to collating those information together, it just resulted into a poor cost management practice. Poor cost management practice, as you know, basically results in late involvement of sourcing.
Because till the time the procurement identifies what should be the appropriate cost for this item, to benchmark that and send it to the strategic sourcing team to do some external market surveys, external RFQ analysis, it becomes a very delayed process. Hence, on the next slide, we talk about how total cost management, target cost management is catered within Cadencia. You break down the entire cost, talk about your suppliers' regional cost, geographical impact, tariff impact, any specific transportation hidden cost. All of those are catered within Cadencia as an end-to-end system. This platform not only takes into consideration about what can we do when a cost for storing or storage increases, but also talks about what can I do if a supplier within a specific region goes into a high-risk zone due to climatic conditions. In those cases, you have simply broken down the entire cost element.
You have alternate suppliers available as a repository of information within Cadencia. Anytime a risk is being forecasted, the system starts sending out notifications to the BOM Managers that, "Hey, your appropriate estimated cost for the entire BOM will now be affected in the next coming months or the next coming weeks," or it has been affected because of a catastrophic event happening right now. Let's say the Suez Canal getting closed. In those cases, the system needs to identify what can happen now based upon the alternate suppliers available. That is only possible because you have the ability of breaking down the entire cost within Cadencia and linking it back to your BOMs. Let's move on.
Which customers do.
I mean, you use not the F word, but the T word, tariffs, which is a topic that is top of mind for a lot of organizations. Having that visibility into cost really enables a proper tariff management to understand where are my costs, what am I able to do in terms of moving production, or where I buy from, et cetera, et cetera. That visibility is super important to react to what you described, Imran. I would say also, it's super important to understand cost. One thing that's great about Cadencia, as you explained, you have different ways to estimate costs. You can do it through the usual sourcing events.
It's a supplier input, but you can build deep should cost modeling so that you can have a benchmark or something to understand and compare with, which changes totally the conversation you can have with your suppliers in terms of, as I said, I was a buyer a long time ago, and there was a huge pressure on cost savings. We were going to suppliers and saying, "Hey, for next year, it's - 5%. I don't care how, I don't care what, but you do - 5%." At the end of the day, that's not a super, yeah, in terms of relationship, it's not super the best way to handle relationships, and especially with critical and strategic suppliers.
When you have this full picture of cost and your own reference with your should cost, you can start really to understand and work collaboratively with suppliers in terms of identifying the levers and what if we're changing raw material, what if we're changing something in the process, et cetera, et cetera. I think what is great here is that you can have the supplier view, but you can have also your own estimation. Then you have this whole AI-based stuff that you described, Imran, better than I would do in terms of having also market inputs. It's really having all the cards in hand so that you can identify opportunities and also change the conversation with suppliers and build meaningful relationships, which are very important, especially when you launch a new product, going back to the 80% and the DARPA study of the beginning.
All right.
Good point. Good point, Bertrand. Thanks for adding that. Because that very well brings me to my next slide on the screen, which is how this company, which was managing the manufacturing of seats and other equipment for other global car companies, could overcome that issue. Because now it's not just about estimating the best cost and finding the best cost through sourcing events and should cost, but knowing what's really going into your costing process and knowing how you can avoid pitfalls and incoming risks across the entire costing process. Because even though you might come across the best cost as of today using the best possible sources, you're not aware of what could be the appropriate risk elements affecting the total cost in the near future. Hence, this company, a global automotive supplier, basically had more structured BOMs.
Their target cost was when they would estimate that and go through different stage gates would be very much relevant to their current cost management processes. When they would launch new products in the market, they had the ability of launching it with decreased prices, managing direct cost directly. Because in the event of always keeping in track about who could be the alternate provider for different elements of my overall cost or my overall product, this company actually identified the ability of finding suppliers who also have the capacity to reduce their cost and upgrade their offers or update their offers. In this process, they were decreasing the overall cost for their products, which was really helping them to close down the target material cost gap and the current cost gaps.
Overall, in the end, because you are mitigating cost parameters due to risk elements, the target cost management in collaboration with a BOM costing tool, in the end, goes into the process of decreasing the sourcing and price management lead time. That is what customers and organizations really focus on, that I am finding the best possible options for suppliers and everyone, but is it properly communicated with my other stakeholders? Even though customers were doing it, when they come to us and companies are doing it as of now, they are doing it across different systems, different offline and online systems. When they come into Cadencia, it is all tracked within the same platform, the design-to-source platform.
Even if a team member from a different region is updating something about suppliers and a team member from a different department from a different country is working on that BOM, they would always have the most updated information to source that product and design that product. Let's move on to the next one. This is what really helps our customers for Samsung SDS Cadencia actually give us a very common bottom-line feedback. Hey, this is your hero feature, right? AI quotation analyzer. This is a very powerful functionality, even in my view, being in the industry for the last 16 and a half years using different sourcing tools. Mind you, there are some really good ones in the market from different companies that I've worked for.
What really makes the Cadencia Platform stand out is focusing on the direct materials management and having an AI quotation analyzer system, which works within our sourcing tool to help identify the best possible costing scenario for you, which you can use to renegotiate with your suppliers and your ODMs and also go to the market yourself and have those pre-approved supplies in your own repository. Typically, what happens over here is when these global manufacturers and these big organizations in the world are working on different products, they eventually have come to a situation where they have worked with so many manufacturers and so many suppliers that they have made their own list of approved suppliers. A company would have the list of own approved suppliers. Then they would have their ODMs or their manufacturers having their list of approved suppliers.
There would be this other third list of suppliers which are not touched upon by this primary company. When they do that, and if you specifically focus on the right side of my screen, which is quote versus estimate analysis, those are the RFX quotes which ODMs or manufacturers who are basically working in the designing process with these large companies, they provide their RFX quotes which are coming in from different suppliers. Those RFX quotes are now being compared by the AI quotation analyzer within Samsung SDS Cadencia to the same parts or very similar parts using a combination of machine learning and AI. Machine learning and AI basically helps you identify what could be the best possible alternate source or alternate part or the same part from a different supplier or from a different BOM where you had a better pricing.
In those cases, the system simply highlights that for you, gives you the estimated difference, which you can simply download from the system over here, go back to your ODMs and ask them for a better price. If your ODMs cannot get you the better price, but you know that you can simply ask your ODM to remove that specific assembly, that specific subcomponent from the entire BOM structure, and you could source that yourself. In the end, the system over here links with our BOM collaboration tool, links with our sourcing tool. Even if customers are not using the sourcing tool from SDS Cadencia in the first phase, they can still upload Excel files into this AI quotation analyzer as their quotes or bids coming in from their ODMs and let the tool analyze those bids.
That is the reason why we call it the AI-based quotation analysis tool. Let's move on. Let's see how that has helped our customers too. Another global automotive OEM, an OEM which was basically focusing on building sedans, SUVs, trucks. Many of us in this specific meeting right now might be using a few of those cars and vehicles because they are available in 10+ countries. They are available in much more than 10+ countries, but their operations are across 10+ countries. This company was facing that very first issue that we always spoke about, long lead time for quotation analysis, where quotes were coming in from 200–900 line items from their ODMs, from their manufacturers, from their suppliers.
Imagine analyzing that and coming back to a more strategic and meaningful result, even to go back and renegotiate, forget about putting that into an actual cost of your total cost for the entire product. There was a capabilities gap because when we talk about organizations that have a global presence, these companies talk about people who are constantly being hired and moving up the levels. The performance level gap between stakeholders doing sourcing, doing procurement was a huge difference. Last but not the least, the lack of proper information. No historical learnings could be fed into the new processes, new quotes coming in, and that basically led into this company resulting in a loss of millions of dollars. Let's move to the next slide.
Using Cadencia's AI quotation analyzer and the ability of estimating cost, if you click one more time, these systems available within Cadencia would basically help with the click of a button if you move to the next screen and have that information come in populated from multiple sources directly within Cadencia. Integration has always been a strong aspect for the Samsung SDS Cadencia Platform. Even if systems are available outside of the Cadencia Platform, this tool will simply bring in the data, use a combination of its ML and AI technology.
You can simply change the parameter to say that I want the system to analyze using AI, but the similarity can be on a 95% similar basis, can be on a 100% similar basis, can be on an 80% similar basis because I know the specifications can be very much the same, even if the description for that part changes. That is what Cadencia does. In order to do cost estimation, it not only brings into consideration information coming in from multiple sources, but also lets you identify the best possible source by giving a little leverage on the item description because the specification would still be the same.
Let's move on to the next one, where we specifically talk about how Cadencia helped that same company identify and reduce that gap, which is impacting a 5%–10% quoted price reduction, not just reduction in their overall sourcing time, but also a reduction in their price because, as I was mentioning earlier, as long as you have that data available, accessing that data and leveraging the data at the right time also makes a strong difference. Hence, an increased buyer negotiation power giving the Cadencia Platform users from the strategic sourcing teams from these OEM manufacturers, getting visibility into third-party market sources, the historical sources of past POs and contracts would enable them to go and renegotiate with their flagship manufacturers too. Let's move ahead. That in a nutshell was the capability of Cadencia at a very high level.
We have the ability as of today to do tailored, customized demos for our customers or for companies who are interested in our capabilities. We'd like to learn more about what's happening at your end, your issues, your problems, and see how that can be fitted into these different pieces of the design to pay, design to source to pay platform being offered using Cadencia's capabilities. Because it's not just a combination of how would you launch your product, reducing the overall time, how would you do reduction in cost, which would anyway result, which would at any time using Cadencia's direct management capabilities give the result of 2%–3%. And mind you, for direct procurement, direct materials management, 2%–3% is a huge number.
The overall procurement reduction, because you're involving procurement much earlier in the designing process, involves a much stronger collaboration and reduces the overall cycle time. In the end, we have companies that are not just U.S.-based. We have companies that are also based in Europe. We have companies based in APAC who have different requirements, different needs, which impacts the overall resilience capabilities, sustainability, ESG, supplier rankings, and so on. Cadencia takes into consideration all of that. This is a slide slightly older. I wouldn't say the latest slide because it still mentions a number of customers as 440+, which is currently close to 500 using the Cadencia Platform, using them globally. Thank you so much for this time to talk about our capabilities, but I'll open the platform and the forum to questions.
Great. That was great, Imran. Thanks so much.
A lot of detail into the system. I was going to ask some stuff on the cost modeling, but I think you touched a lot of these. We've got a lot of questions coming in from the audience, and please continue for the audience. Please send them in. One of the usual questions is kind of, are you going to get a copy of the presentation? Yes, everyone will get a copy of the replay link as well as the presentation. I just wanted to get into some of the specific questions. Let's kind of talk a little bit about data and data integration, data standards, keeping Cadencia integrated with the PLM, keeping it integrated with ERP. Obviously, product configurations can get very complex. The new product introduction engineering changes, all those things.
I assume there's kind of a robust integration framework about how you kind of keep the data governance and integration around how you synchronize everything here in terms of the items and the costs. Maybe, I don't know, just any kind of comments around how you do that, just given the volume, the size of the bills, and the velocity and all that stuff, how you make that happen. Any comment there from you, I guess, Imran, on kind of just how you do the data integration there between PLM and the ERP and other sources?
Thank you. That's a very meaningful question, Pierre, because our customers as of now, who were initially our potential clients, basically came to us with that very similar question. We have this PLM system. We have this ERP system. Where do you come in?
What value do you add in a way? That is the part where we talk about how these different systems, which have very meaningful information, which is your PLM system having your BOM data. The BOM data usually is not a complete BOM structured data within the PLM systems. That is the first stage where the requests start coming into Cadencia, a request coming in from the PLM systems as an unstructured BOM, sometimes called as the CBOM or the SBOM. The structure or the deep dive information is given into those BOMs using the collaboration tool within Cadencia. As part of that collaboration, it is not just you collaborating internally between engineers, procurement stakeholders, sourcing team members, logistic team members, and of course, your manufacturers. It is also about collaborating with your ERP systems where information is being hosted about item masters.
Information is being hosted about supplier masters, your primary suppliers, your alternate suppliers, your supplier scorecards. Cadencia has that capability of bringing in data from multiple sources and then allowing you to collaborate in a much more effective manner. I'm choosing this appropriate BOM and expanding on it, but I'm also taking into consideration additional aspects of choosing the right supplier, the most sustainable product, the most appropriate region to source from.
Yeah, that makes a lot of sense. Actually, I mean, there's a related question, and there's a few of them kind of that have to deal with this, which is kind of around the data modeling of the items, I guess, when, as you said, the PLM can do some of the EBOM and the individual items, and on EBOM and on the production items, there can be various as-built configurations.
Obviously, those can sit within the ERP and whatnot. In terms of just some of the more sophisticated modeling, maybe just touch on some things around, say, substitutes and replacements, right? Ultimately, could feed your supply chain planning systems, your tariff analysis, but just your core supply planning when we want to know how to allocate things, different suppliers. I guess that's kind of one use case as well as maybe a little bit something around kind of on the BOM side, around kind of multi-tier BOMs, price masking, these buy-sell arrangements, things where we're kind of designing in a multi-tier environment where you have to have some kind of nuances around what data is shown to whom within the process.
Maybe just talk a little bit about, I guess, first, maybe just about in terms of at the part level, some of the kind of functionality that you have there, and then we can talk about on the BOM level.
Of course. Let me answer that in a way which is managing those different phases that companies and organizations have when they're going through a cycle of launching a new product, finding the best suppliers, making quotes available, making quotes available in a way that it's not affecting the decision-making process for engineers and procurement stakeholders to negate the other quality aspects. Hence, when organizations look at the Cadencia Platform, they're talking about things like moving on from the incubation stage all the way to the launch phase, and sometimes even going beyond the launch phase into maintenance and sustenance phases.
In these cases, organizations have very strict processes which Cadencia adheres to. Those processes include having only specific stakeholders in the entire team getting access to that product, getting access to information within the product, getting access to certain levels of BOM within that product. When those phases from incubation keep on moving stage by stage across launch and sustaining, you also decide that, okay, now I want my additional teams to participate. These teams will have access to the cost information. The previous team should not have access to the cost information. The level and the granularity of information that can be shared, that can be made visible, that can be not made as visible components to specific stakeholders plays a very key and important role because towards the end, you do not want to select the most appropriate BOM structure just upon the costing information.
You want the right suppliers. When choosing the right suppliers, you don't want to basically choose the right suppliers based upon their performance levels only. It is a combination of multiple parameters which Cadencia provides to the end users. Let's say when it moves from a stage where the backend procurement team has made their decision using a system like CleanSheet, which was holding all the costing parameters of a BOM or for a product, they made a decision of pulling in data from that CleanSheet into this BOM tool. Now they want the strategic sourcing team to go out and find if they can do a better costing or a better pricing or whatever.
In those cases, the strategic sourcing team comes back with much more relevant results that, okay, we have a supplier who can give you a price of $X based upon what you need, but we also have an alternate supplier in case you decide to change your BOM version eventually going into the sustainance phase or the maintenance phase. These are things which are capacity-based capabilities within the Cadencia Platform because once you start storing different versions of that BOM, you will have the ability of comparing those BOMs together and identifying what's really making a difference over here. Is it just a supplier's region or some pricing parameters or even the specifications going into my items and parts?
Yeah, that's great. That's a great answer.
I think it's a great segue to this question about being able to do some analysis to understand not only around kind of BOM comparisons, but item similarities, cost analysis. You mentioned that one screen where you had some of the kind of the estimated costs, right? The area around cost estimation is one as old as design. Maybe just, Bertrand, let me actually start with you on this, and then we'll pull in Imran in terms of the issue around cost estimation and maybe starting from the PLM system and also from the CAD and the drawings and the material estimates and kind of all the not just the design for manufacturing ability pieces off of the out of the CAD system, but some of these issues around material analysis, linking it to commodity prices and things.
Just any kind of trends or insights around what you're seeing around some of that kind of cost estimation side. Imran, just maybe you can talk a little bit how you guys do it natively or with partner solutions or whatever. Bertrand, let me hand it over to you first.
Yeah, no, no. I would say that you have to have a large spectrum of solutions available around costing, etc. I'm more talking about based off grid and also stuff that do also sourcing on top of that. You either have the quick and not too dirty estimations.
The idea is to say we do not want to have 100% correct and accurate costs, but we need a reference to understand if whenever we are designing a product or we got a quote from a company, we want something that would allow us to benchmark it because we have no clue. You have a bunch of providers that are more on that part. Then you have the super deep cost estimations where what you want to do is to be 100% accurate. I mean, I am using air quote here because nothing is 100% accurate. Yeah, and those best of breed costing solutions will go pretty deep into understanding the specs.
Extracting metadata from either the specs, the PDF, or etc., and even leveraging the CAD files to 2D or 3D because they have a huge knowledge base in terms of process and all the drivers you may have behind, etc., etc. We'll do some kind of analysis of, okay, that's the part. Most probably it's manufactured with that process, with that step, etc. You have, based on that shape analysis, a trickle down that will then calculate every subcost, manufacturing, quoting, or whatever, whatever. These are the two extremes, if I could say. I would say Cadencia fits kind of in between, but that's more for you, Imran, to confirm that.
Yeah. What do you see, Imran, with your clients in terms of what they're looking at for kind of precision around on the cost estimation side?
Of course.
You touched upon a good point about the item similarity because a lot of time the cost estimation also gets affected by the same product being used or being manufactured across different plants and different plants using parts from different suppliers and sometimes also using different parts for the same product because they have a very similar specification. All this results in having varied costs, even if it differs by a few cents, but when you are manufacturing millions of those products, it makes a big difference. That is how we just scratched the surface on the SDS capability, the Samsung SDS Cadencia's capability. Our solution has an inbuilt item similarity analysis.
When companies and organizations with stakeholders in the sourcing and the procurement team start analyzing in the system that, okay, this seems to be a similar product that we had a few months ago, and we are relaunching it today, why do we have a different supplier giving us the same part at a different price? Using our item similarity analysis, you can actually have the system identify what are those key parameters which will help you identify the common parts which are same or similar but being sourced from multiple suppliers. That's when you make those important moves and decisions that, okay, going forward, anyone trying to order this specific part with these specific specifications, this should be the primary recommendation to that procurement team or to the manufacturer.
Yeah, that makes a lot of sense.
It sounds like having a really robust decision support and kind of workbench, whether it's for procurement or for the commodity responsible engineering design, to kind of have all these factors. Your results may vary depending on how much precision you need and what commodity and all that kind of stuff. Unfortunately, we're getting to the top of the hour, so I was going to kind of go into AI, and I know there's a lot of that's such a rich area, whether it's going to be on the analytics or on agentic process orchestration or on all the various different areas where it can really help. Maybe that'll be an opportunity for the next webinar. We can dive into the AI side a little bit more. Anyway, listen, I just wanted to thank Imran and thanks, Bertrand, for your insights here.
Thanks to the audience for attending and for your great questions. Hopefully, this was useful. As I said before, you'll get a copy of the deck and the webinar replay. If you have any further comments, please let us know on any other topics you'd like to hear in future webinars. With that, we're going to sign off and wish you well. Thanks again, guys. Appreciate it. Thank you all. Take care, everyone.