Daily Archives: December 18, 2008

On the Sixth Day of X-Mas … (Cost Reduction Strategic Sourcing Strategies)

On the sixth day of X-Mas

my blogger gave to me
tactics for saving,

five golden rings,

four little words,

tri-focal lens,

two boxing gloves

and a lesson in strategy.

Six tactics that you can use to save in today’s marketplace are:

  • Reverse Auctions on Commodity Categories in Competitive Markets
  • Sealed Bids on Strategic Purchases of Custom Goods or Services
  • Decision Optimization on High Value Goods
  • Process Re-engineering with Strategic Partners
  • Lane Optimization
  • Distribution Center Optimization

Reverse Auctions on Commodity Categories in Competitive Markets

A recent post on Supply Excellence asks if you are not sourcing, why not? … and it’s a good question. Many key commodities that go into the parts you buy, and the energy your suppliers are using to convert raw materials into finished goods, recently hit two, three, and, in some cases, four year lows thanks to the recent decline in global demand. For some categories, it’s the best sourcing market we have seen in years as far as reverse auctions are concerned. So review the reverse auction selection criteria over on e-Sourcing Forum, where you can also find details on reverse auction strategy and reverse auction basics, brush up on the key steps to successful e-auctions, and get sourcing!

Sealed Bids on Strategic Purchases of Custom Goods or Services

If the category is strategic, and you can not use a reverse auction or open-bid methodology and have suppliers compete solely on price, because quality will be just as important, use a sealed bid.

Decision Optimization on High Value Goods

As outlined in my recent posts on e-Sourcing Forum and here on Sourcing Innovation where I asked if you can really afford to leave millions on the table, strategic sourcing decision optimization typically saves you 12% above and beyond what you will save with your best reverse auction, and, even today, still saves you up to 40% on some categories … which is an awful lot of bling if we’re talking about a 100 Million category. So review the decision optimization wiki-paper, select an appropriate solution, and start saving.

Process Re-engineering with Strategic Partners

Streamline processes and increase productivity. This allows you to increase spend under management and the savings you can generate. And if you’re worried about resistance, check out this post on overcoming worker resistance in process improvements.

Lane Optimization

Make sure you are using the right lanes at the right service levels from the right carriers. Otherwise, you could be considerably overspending on your transportation. As Dan Kowal pointed out in his recent Supply Excellence post, the Baltic Panamax Freight Index has dropped 90% since May of this year. The market is rife with opportunities.

Distribution Center Optimization

An inefficient distribution network is costly. Save big by optimizing your network. For details on how, see my post on Bob’s Unique Talents.