When managing procurement/supply chain for costs reduction,
There are two types of targets:
**Tangible ones:
- Costs of products/services
- Transporting costs
- Stock costs
- Warehousing costs
- Manufacturing costs
- Travelling costs
… …
The cost reduction on tangible items is comparatively easier to capture via strategic sourcing, RFP/RFQ processes, negotiation, etc.
**Intangible ones:
- The unnecessary costs and wastes from heavy processes
- The extra costs on finance, warehousing due to not-proper ordering...
- The costs of negative operational impact due to delays, wrong sourcing, or wrong timing delivery
- The costs of lowered credibility due to failed delivery or less satisfactory quality
... ...
The proper management of these areas usually generate more significant cost savings and have far-reaching positive effects (even though it might be not that easy to quantify the exact dollar amounts saved).
What we want to achieve is the lifting of the whole SC system (sourcing, procurement inclusive) for the max. cost reduction so that the company enjoys healthier profit.
And with better quality goods and services, efficiency, controlled risks as well as stronger teams, the business is enjoying boosted energy from the backbone, much stronger competitive advantage for its robust development into the future.
The solution to this part involves quite detailed strategies which touch on various aspects.
And these are to be reflected in the solutions we are to supply to our customers.
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