Smart Contracts - LCD Panels (Fortune 500 Technology Company)

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In this case study learn how BRIDGEi2i helped a Fortune 500 Technology company to develop a Price Forecasting algorithm for LCD Panels as a commodity to help understand forward-looking trends in the market and to use these forecasts to create a long-term Smart Pricing Mechanism.

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Smart Contracts - LCD Panels (Fortune 500 Technology Company)

  1. 1. A Case Study in Smart Contracts - LCD Panels A Fortune 500 Technology Company Quick Context Objective a. LCD Panels are a highly price-volatile and high-spend commodity for Technology companies b. Client wishes to enrol a new Vendor; Wants to have a better price mechanism • ~10% lower cost on annual spend with the new supplier negotiated based on the model • ~$35mn business impact due to the negotiation Impact • Smarter contracts are the best way of assuring a cost leadership position amongst competition • Our analytical frameworks augment the procurement managers ability to negotiate a savings Key Success Elements Our Approach 4 Months 3 Years Client Project length Length of relationship with client • Historical demand forecasts and actuals – performance of forecasts through bias and accuracy • Spot market Panel prices and Contracted prices from all Vendors • Quantity demanded vs. quantity shipped • Quantity commitments, existing Price mechanisms and rebate structures • Game-Theoretic approach based on past vendor quoting behavior • New vendor is often willing to bid against the least cost on system for a higher share-of-wallet (SOW) • Rebate structures were built-in to ensure this happens • For various SOW scenarios and Panel Spot market trends, Risk estimates were made • Understanding of internal demand uncertainty • A robust buy-price forecast for panels and variants • An understanding of Price mechanism for assured profitability in contract formulations • A guard against supply disruptions through penalization clauses Data Management Algorithmic Play Operationalization a. To develop a Price Forecasting algorithm for LCD Panels as a commodity to help understand forward-looking trends in the market b. To use these forecasts to create a long-term Smart Pricing Mechanism $0 $1 $1 $2 $2 $3 $3 $4 $4 $5 $0.50 $0.75 $1.00 $1.25 $1.50 Millions Rebate---> TotalLoss RebateGain NetGain $1,991 $1,421 $915 $531 $2,397 $2,967 $3,473 $3,857 $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $0.5 $1.0 $1.5 $2.0 Max ExpectedLoss Net Gain

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