Game Theory Drives More than 3x post-RFQ Savings in Steel Sourcing

A €12B global automotive supplier turned a “low-savings” steel category into a double-digit 13% cost reduction, more than tripling expected savings and delivering $5.2M in just four weeks.

// At a Glance

The 109 individual steel references worth $41M were grouped into nine packages and run through a three-phase, game-theory-driven negotiation process with 12 eligible suppliers from across the globe.
The process combined supplier qualification and ranking, exclusive incumbent offers, Dutch and sealed-bid auctions, underpinned by a holistic business case covering material, logistics, scrap, supplier validation, and tariff costs.
Savings more than tripled versus the RFQ baseline, reaching a double-digit 13% reduction or $5.2M savings within the four-week awarding window.

Industries Automotive & Mobility

Expertise

// Challenge

Limited Regional Supply Under Strict Origin Rules

At stake for the global automotive supplier was $41M in annual spend across various steel grades for a premium automotive OEM program, and three intertwined challenges stood in the way. Steel is a raw material with structurally low margins, and pricing is largely underpinned by suppliers’ global contracts, leaving few traditional negotiation levers beyond price.

Compounding this, 109 individual references had to be sourced, and the 12 eligible suppliers differed not only on price but also on other factors just as relevant to the awarding decision. And all of this had to happen against a hard deadline: business had to be awarded within four weeks, while supplier evaluation and internal alignment on business requirements were still underway.

// Approach

What Made the Difference

To overcome these challenges, we designed a three-phase, game-theory-driven negotiation process built to maximize competition and create the strongest possible incentive for suppliers to submit aggressive quotes. To manage the scale and complexity, we grouped steel references into well-defined, independently awardable packages, and evaluated all suppliers structurally and holistically by monetizing their differences with the bonus/malus framework.

And to move fast while not cutting corners, we prepared structured, comprehensive negotiation documents and tools in advance, and secured the internal awarding mandate before negotiations even began.

Engineering the Right Incentives

We ran a three-phase, game-theory-driven negotiation process post RFQ, with two weeks of preparation and two weeks of execution. With the mandate and toolkit already at hand, the process ensured that suppliers were incentivized to provide their best offers in each of the phases:

Phase I – Qualification & ranking (5 days)

All eligible suppliers had five days to submit their new quotes for each package. The two suppliers per package ranked best on a holistic basis qualified for the next phases.
Phase II – Exclusive offers to incumbents (1 day)

Qualified incumbent suppliers received exclusive “take-it-or-competition” offers, in rank order, an opportunity to secure business ahead of open competition.
Phase III – Dutch & sealed-bid auctions (1 day)

Remaining business was awarded through Dutch or sealed-bid auctions, all conducted on a holistic business-case basis for each remaining package independently.

The negotiation process was executed by email with the business awarding Phases II and III taking just one day each and decisions made on the respective day.

// Result

More than Tripled Savings

Savings more than tripled from the RFQ baseline of $1.7M to the final $5.2M, leading to a double-digit 13% price reduction against baseline, in a category the client had initially expected to yield minimal additional value. And all done within the required four-week awarding window.

Key Takeaways

Maximize competition at every step. Auctions matter, but so do rigorous qualification and ranking ahead of the final awarding phases as competition works best when it creates the right incentives from the start.
Package business strategically. Grouping references into well-defined, independently awardable packages made each package more attractive to suppliers and ensured good quotes even for small-volume references.
Evaluate offers holistically. Bringing raw material, logistics, scrap, supplier validation costs, and tariffs into a single business case ensured that the best overall suppliers won the business.
Speed with preparation, not shortcuts. A successful, multi-phase negotiation executed in just days was only possible with quotation tools, communication documents, and the awarding mandate secured in advance.