Thursday 9 October 2014

The Most Effective Cost Reduction Tip is first to stream line your Supply Chain Process

Authored by Usama Shahid

Over the past years I have looked at the sourcing, procurement and payments processes in different companies from various industries. 

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 incentive 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. In their drive to reduce costs, keep their operations as simple as possible and eliminate bureaucracy they just ended up with an efficient supply chain.