Buyers Meeting Point procurement by Kelly Barner

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Continuous Cost Reduction for Direct Materials

Continuous Cost Reduction for Direct Materials

Continuous cost reduction in the manufacturing industry is a supply chain best practice, but all too often it is mistakenly seen as unsustainable by strategic sourcing and procurement departments. For many companies the question is, ‘how can I reduce costs while limiting the impact on quality?’ Before jumping right to substituting materials, there are other options for delivering cost savings - yes, even over time.

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Continuous Improvement for Procurement Leaders

Continuous Improvement for Procurement Leaders

As parents, we make sure our children have regular visits to the doctor and dentist. This is a routine checkup to ensure everything is on the right track and progressing as expected. In our professional lives, it is good for an organization to have a ‘healthy checkup’ as well.

This week’s article is highlighted by Pymnts. It is a study by IBM after surveying over 1000 CPO’s across 41 countries. This highlights the behaviors of strong procurement teams. New Study separates the World's Procurement Leaders from the Followers outlines 4 differentiators. Reviewing material such as this regularly is akin to having those checkups at the doctor’s office.

One of the differentiators is working closely with the stakeholder. If procurement works in a vacuum or with little interaction, there is less of an opportunity to get it right or improve. In the example below, this is a classic example of the customer wanting a simple tire swing, did not explain it very well and it was designed completely wrong. If there are iterations and fine tuning through the process, the result is most often what the stakeholder requested.

tire swing cartoon

Another differentiator is technology and data. That seems hard to believe in today’s world of being totally plugged in at all times. However, many organizations are still operating with decades old systems and processes. For the world class procurement team to flourish, the resources have to be available in staff, processes and technology.

How would you have responded to this type of survey? Would your CPO have indicated your team has worked towards being leaders? Or would you say that you have some catching up to do? What type of swing would you have built for your stakeholders?

Share your thoughts by commenting below or tweeting us @BuyersMeetPoint.

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