By Doug Hudgeon
The Cost Reduction Tip
Over the past 12 years I’ve looked at the sourcing, procurement and payments processes in 150+ companies spanning every continent except Antarctica. At a detail level, the best of these companies took very different approaches to managing their suppliers – approaches tailored to the subtleties of their industry, geography and economic climate.
But the best shared one common trait: Their supply chains were as simple as possible given the constraints of their operating environment.
That’s not to say they weren’t sophisticated – often they were (in a surprising number of cases they were not) – but they were all simple.
Commonly, but not universally, the best companies regularly tendered categories that didn’t matter much. Commonly, but not universally, they would set up longer term relationships (with both parties incentivised to meet a common goal) in the categories that were critical to their ability to deliver value.
In all categories, their sourcing, ordering and payment processes were as invisible as possible. Many of the best companies did not even view their supply chains as strategic. I
n their drive to reduce costs, keep their operations as simple as possible and eliminate bureaucracy they just ended up with an efficient supply chain.
Doug Hudgeon who is lawyer and vendor management professional who has branched into finance and accounting shared services management.