Supply Chain Management offers purchasing new muscle in
the battle to reduce costs. In fact, customers who are successful
at supply chain management can often reduce total cost by
30% compared to the price they pay for goods and services.
That's a tremendous opportunity for many companies.
To achieve, they need to focus on three key issues:
Commodity / Service Planning: while most companies
can determine their supply needs, and develop processes
for procuring these items and services, these same companies
fail to develop a commodity / service plan around total
cost issues and the risks involved in reducing these costs.
In terms of total cost most companies focus on 10 - 15 opportunities,
such as vendor managed inventory. But in a recent study
over 185 different opportunities to reduce total cost were
identified by customers. If companies do not know what the
opportunities are, how can they determine what the best
options are for their organization?
Managing the Change: is one of the toughest aspects
of supply chain management. Even with full top management
support, the change will be difficult. Companies need to
involve all functions/departments impacted by the supplier,
and develop implementation plans for these areas that include
how this will help them to accomplish the goals of their
departments. But plan is only the tip of the iceberg. Unless
and until it becomes a part of the organizational culture
and systems, it will eventually fail. Which is why change
is often referred to as a process, not an event.
The Total Cost of Ownership: is the foundation of
supply chain management, and yet very few companies understand
it, much less have the ability to measure it. And the need
to be able to measure it is critical. Without it you will
never really know if you are paying too much or losing profits
because you are not willing to pay enough. But to measure
it effectively requires that all aspects of total cost be
measured: price, value added, and poor performance costs.
Combined they can help companies to achieve a competitive
advantage through their supply chain.
