You will know that purchase price and cost are not always the same thing! We take a holistic approach to understanding the true total cost of supply. Unit price is of course a key driver, but before a successful sourcing strategy can be developed it is important to understand cost in the round. In addition to purchase price, we focus on two core areas of total cost analysis:
- Supply chain costs – these may include delivery costs, third party warehousing costs, the working capital cost of inventory and payment terms; and the cost impact of lead-times, delays, or persistent poor supplier performance.
- Use and wastage costs – these may include non-conformance costs, defect and failure rates, and operational waste drivers.
The outcome of our analysis is to gain full cost visibility, so that we can prepare a consolidated spend report and agree the baseline starting position for effective supply chain optimisation.
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Now that your baseline cost position is understood, we focus on three critical components of your sourcing strategy to optimise your supply chain. These include:
- Ensuring a specification-driven sourcing exercise – it is essential to compare “apples with apples” and ensure any proposed new supply is fit for purpose.
- Portfolio rationalisation – despite best efforts to keep product ranges controlled, multiple subtle variations in product specification creep into your business over time fragmenting the volumes of goods being sourced. Taking the time to look for product specification alignment and product line rationalisation opportunities can result in fewer line items with greater volumes to attract more competitive pricing.
- Competitive tendering – we use negotiated competitive tendering techniques to secure the best possible market rates, set within terms, that can address any phase one cost improvement opportunities, such as:
- Optimised minimum order quantities
- Fixed or index linked pricing
- Volume based rebates
- Improved payment terms
- Product quality / defect rate guarantees
- Reduced stockholding
- Vendor managed inventory
Our analysis of tender outcomes provides you with a clear view on realisable best value sourcing, and on a premise that cheapest is not necessarily the best value!
In circumstances where we identify opportunities through a change of supplier or item, no supply terms are agreed without the buy-in of your commercial, operational, quality and safety stakeholders – achieved through full-scale production and supply chain trials to understand overall performance acceptability and your new total cost position.
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We help our clients build long term strategic supply chain partnerships. Fostered through structured account management, we help you ensure that value does not leak from your supply chain through poor category control. With initial commercial opportunities secured, we help you generate additional gains through value engineering and supply chain improvement activities.
By helping you identify and develop strategic supply chain partnerships, we are confident you will outperform your competition and achieve longer term value for your business through supply chain collaboration and innovation.
Are you interested in driving collaborative growth?
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