An application developed using advanced analytics and mathematical optimization modeling to optimize optimal vendor search for a leading stainless steel sink company
Client: Elkay Manufacturing Company, Inc. is a leading manufacturer and supplier of kitchen and bath products for residential and commercial installations. Elkay has continued to launch a variety of new products and designs over the years, and serves as a front runner in an amazing array of different industries.
Challenge: Elkay had difficulties finding the optimal vendor for it supplies. SSI team worked with the Elkay management team during several rounds of supplier negotiations and modeled vendor responses and ran numerous optimization scenarios to select the best suppliers and helped Elkay transition from the incumbent vendors to the optimal vendors over a two year time period.
Solution: The key processes involved by SSI for modeling the optimal vendor search system were demand analysis, supplier modeling and supplier selection. Demand Analysis was done by determining raw material widths to source. Supplier modeling included modeling of supplier responses including price structures, discount structures, incentives, etc. Supplier selection was done by determining optimal mix of suppliers for each product and facility through mathematical optimization modeling.
Result: Through SSI’s help Elkay was able to reduce 11% sourcing cost for the first year and eventually succeeded in reducing 5% additional sourcing cost for the second year. Moreover, annual material costs were lowered from $50 million to $42 million.