Bridging the Gap Between Price and Utilization Savings
I just had a conversation with a material manager who told me that he was trying to change his orientation from price to utilization savings, because he now realizes that his price savings are slowly disappearing.
In response to his comment, I told him that price savings, cost avoidance and inflation fighting should still be a priority with him, but he also needed to bridge the gap between price and utilization savings if he wanted to continue his double-digit savings every year. I believe the goal of every supply chain professional in 2010 should be to avoid being blindsided by diminishing, thinning and meager price savings that are a reality today.
Here’s how to do it! First of all, price savings is exclusively a purchasing activity so let’s keep our buyers pecking away at even more price concessions, better terms and conditions and negotiating special deals to hold our cost of acquisitions to an absolute minimum.
On the flip side, let’s get our value analysis teams in high gear to attack our utilization misalignments, since this is their area of expertise and can best be accomplished by teamwork – not individual activity.
This success formula is the simplest and easiest way I know of to bridge the gap between price and utilization savings without missing a beat. You don’t need to hire new staff, reinvent the wheel or even change the way you do business.
Just change your operational orientation from price ONLY to utilization too since there functions aren’t mutually exclusive. Then you will have the best of both worlds to attack your total cost of acquisition to disposition in just two complementary supply chain operational areas. The solution to this challenge can be just as straightforward as that!
Filed Under: savingsblog • Utilization Management
