This was the question that was causing headaches for the procurement team of a leading German car manufacturer.
In 2022, US customers already had an appetite for imported electric vehicles (EVs) from Germany. But to efficiently meet the growing demand for electric vehicles from American customers and secure market share, a local production network was needed. Besides building factories, this also meant identifying suppliers in a little known supply market. Time was of the essence here, as the competition already had a head start with established production networks in the US.
One crucial item of supply would be magnets, which are an essential part of electric vehicle motors. Traditional magnets, particularly neodymium magnets, often contain rare earth elements, which can be expensive and environmentally challenging to mine and process. Rare earth-free magnets offer an alternative that is more sustainable and potentially less costly. In light of the latter, electric vehicle buyers were becoming more interested in sustainable methods of production. This strengthened the case for rare earth-free magnets. And, to add even more complexity to the situation, the majority of rare earth mining sites are in China. To source from a country that was in an all-out economic war with the US only increased the risk of higher costs or even disruption, for example, via higher import tariffs on goods from China or total import bans.
The mission was clear: the procurement team needed to identify US-based suppliers of rare earth-free magnets quickly.
The advantages of working with a supplier from the US were manifold. As opposed to sourcing from China, a local supplier would decrease transportation costs, reduce the CO2 footprint of the EV supply chain while simultaneously derisking it. Moreover, using rare earth-free magnets in its EVs also scored high on the
company’s sustainability agenda and - most importantly - would serve as a competitive advantage in the eyes of its customers, who are conscious of the environmental impact of EV production.
On the downside, not having a local supply network of rare earth-free magnets would mean longer transportation routes, a bigger CO2 footprint, higher costs, and longer production cycles, as well as a volatile supply chain. This all culminated in the risk of losing market share to rapidly expanding competitors.
With no visibility of its supply options in the US, the procurement team chose to use Scoutbee Discovery. With very tight deadlines and not many resources available they counted on Scoutbee’s AI technology to find suppliers matching their complex requirements. At the start of the process, Scoutbee Discovery showed its first big strength - the search form specifically designed for procurement needs helped the team translate complex technical requirements into keywords to run the search.
Based on those keywords, the Scoutbee Discovery algorithm scanned the entire internet to aggregate, process, and enrich data from relevant suppliers based in the US. Unlike traditional search engines that present a list
of results based on paid advertisements, Discovery gives impartial results exclusively based on the user’s search criteria. In addition, crawling all available data at the beginning of the search ensured that the most up-to-date data was considered. In contrast to generative AI that focuses on general knowledge, Scoutbee Discovery’s underlying algorithm is exclusively trained on procurement data, making the results more accurate and precise.
Within 48 hours (yes, it takes a while to scan the huge amount of data on the internet), the procurement team received a list of 21 suppliers matching their search criteria . These were listed in order of relevance, based on the number of times the supplier’s website matched the search criteria. Each supplier on the list was linked to a supplier profile enriched with data on revenue, employees, and certificates.
Happy with the quality of the results, the team decided to invite 18 of the suppliers to submit their information and start the onboarding process.
The procurement team was happy to report internally that it now had 18 potential suppliers to work with, having completed their task just in two working days instead of eight - this is the amount of time it would normally have taken them to run the search manually, also with little guarantee about the quality of the results. Compared to comparable projects in the past, they had managed to complete it four times faster, while also growing the quality and
quantity of the search outcomes. Comparable searches without AI-powered supplier discovery had resulted in four to five results, with only one supplier meeting the actual criteria after being scrutinized more closely. In contrast, the team now had 21 suppliers to choose from, and decided to invite 18 of those for further qualification. This equals a relevance of results of 85% compared to 20% without Scoutbee Supplier Discovery.
On a company level, being able to produce rare earth-free electric vehicles meant creating another compelling reason to buy for customers, delivering on the company’s promise to ensure sustainability in every car it produces. Moreover, de-risking the supply chain while decreasing transportation costs and accelerating the production cycle bolstered competitiveness in the US market.
If you’re looking for a way to reduce supply chain risk and improve efficiency in your supplier sourcing, all while achieving your sustainability goals,