As contract renewal talks with original equipment manufacturers (OEM) drew closer, this multinational telecommunications company needed an edge. It was already a market-leading provider of both mobile and fixed telephony services around the world but competition was increasingly fierce. Its negotiators knew that their company's success retaining tens of millions of current wireless subscribers, and attracting additional customers, depended upon its ability to offer consumers the latest technology innovations at affordable prices. The upcoming agreements with OEMs would play a decisive role in determining their company's product offerings, cost structure and overall competitiveness for years to come.
Dual Objectives and High Stakes
The telecom giant's multi-billion dollar spending on handsets, tablets and accessories was strategically monitored by an in-house team of supply chain experts. While this team was consistently challenged to source the most compelling consumer product portfolio on the market, they were also tasked with keeping their product costs at or below the rates being paid by competitors.
Balancing these two potentially conflicting objectives during the next round of negotiations with OEMs over product costs promised to be difficult. The situation was exacerbated when disruptive technologies, form factors (specifications of a motherboard) and operating systems were introduced and time-to-market became critical for maintaining a competitive advantage.
The telecom company's resources and stakeholders were being stretched to deliver top performance on tight timelines. The outcome of these OEM negotiations would impact many parts of the business and organization – including product development, marketing, sourcing, logistics, quality control, competitive intelligence and consumer and B2B sales.
Market Intelligence and Expertise
Recognizing the need to maintain supply chain influence over the cost of mobile devices, the telecom company's leadership knew that it was imperative that they increase their leverage at the negotiation table. They reached out to IHS Markit for support in developing a strategic plan to enable their team.
The telecom team leveraged Technology Solutions™ -- including cost modeling tools, forecasting reports, and teardown analyses – to accurately assess the cost to manufacture each device prior to the start of negotiations with their OEMs. They also armed themselves with detailed benchmarking of device cost and features across all key consumer product categories. IHS Markit supply chain analyses enabled the company to establish a sourcing strategy that mitigated unforeseen supply chain volatility.
We are always striving for operational excellence…IHS Markit helps us provide safety information that our customers want – and that is a competitive advantage.
With access to IHS Markit market insight on technology adoption trends and intellectual property, combined with IHS Markit consultancy services, the telecom company's team was able to anticipate and capitalize on market and consumer behavior shifts more effectively in order to secure their competitive position.
Successful Negotiations and Major Savings
The telecom company's representatives felt confident when they sat down to negotiate with the OEMs. They leveraged comparative analysis of product value across vendors to drive in-depth discussions of design possibilities and alternatives with major suppliers. With increased traction in the negotiations, they were able to measure incremental costs for a product feature versus the perceived consumer value. IHS Markit solutions provided the telecom company's team with the tools they needed to maintain a competitive cost structure and gain greater control over consumer subsidy programs. This effort also aided commoditization of feature phones and other creative endeavors with low-cost prepaid handsets.
This telecommunications industry leader saved many hundreds of millions of dollars (conservatively stated) over the next few years in product sourcing costs – based on its effective use of market intelligence from syndicated IHS Markit solutions and IHS Markit consulting expertise on emerging technologies.
As a result of this experience, the telecom company has dramatically changed its strategic sourcing model to one that enables real-time, fact-based decision making. Its engagement with IHS Markit has expanded to other divisions – introducing unprecedented strategic sourcing activities throughout the organization.
Achievements on Other Fronts
Conflict Minerals - When the US Securities and Exchange Commission adopted the conflict minerals rule based on the Dodd-Frank Act, telecomm retailers were directly impacted. This industry leader turned to IHS Markit for help rationalizing the risks and developing a risk mitigation plan. IHS Markit provided reports capturing:
- conflict minerals embedded within their portfolio
- components dependent upon use of conflict minerals
- alternate sourcing options and supply constraints.
With this information, the telecom company was able to accelerate their risk analysis and establish the required risk profile for conflict mineral reporting compliance.
Low-Cost Handset Design - In the battle to source for the lowest cost prepaid handset and gain a competitive advantage, this industry leader aimed to identify and eliminate unnecessary components and features. They initiated an analysis of handset designs using IHS Markit component cost trackers, teardown analyses, and analyst insight. This effort identified over-engineered features and highlighted cost drivers in standard feature phones under consideration. Product managers were empowered to move ahead with a strategy to redeploy their prepaid service without specific device complexities that were traditionally required by the carrier.
SuperPhone & Disruptive Technologies - In a market space where technology changes rapidly and competition is intense, this industry leader is always looking to be first to market with disruptive solutions. It's part of their winning strategy. As a result, company executives, who are eager to understand emerging market trends and the underlying costs associated with them, rely on IHS Markit to provide insight into these emerging markets. In addition, IHS Markit has been able to complement their internal competitive intelligence team with detailed insights on design practices and cost estimates.
The leadership team at this giant telecommunications company is committed to maintaining its competitive advantage by leveraging the best available information and expertise throughout its operations. Partnering with IHS Markit has enabled the company to successfully address a broad spectrum of business challenges with world-class solutions from a single provider.