How does the 50/50 split work?
• The split is designed to facilitate equitable sharing associated with “hard” dollar Supplier-initiated cost reductions. • The starting point to calculate savings is the current contract per unit price. If a Supplier submits a proposed price lower than the current price, the difference between these two values is both 50% higher than the actual cost to produce and 50% lower than the current selling price to International. • International insists that the Supplier take their fair share in the overall savings. • International assumes that the Supplier has lowered its selling price due to work or volume efficiencies and is sharing this economic benefit with International. • By retaining 50% of this value improvement, the Supplier enjoys higher profitability and International enjoys lowered contract pricing.
