There are many cost reduction opportunities in various industries can be identified in the supply chain network; unplanned and uncontrolled maverick and indirect spends, lack of strategic, core and routine supplier classification and management, wide spread of suppliers used, over specified products and services, dispersed spending and other activities can be considered by M&S to deliver saving up to 30%.
A changing opportunity
M&S provide practical insight to companies thinking about change, or already implemented change but on the low level with the outcomes:
- Consider outsource rather than hiring internal labor
Frequently it is better to have internal expertise rather than look for that externally, However if it is more expensive to sustain expertise internally it worth to look externally to reduce costs and optimize function if the outsourced company can achieve economy of scales on highly priced competence. - Classify high value contracts
It always better to target to pay attention of managing suppliers in accordance to Pareto rule 80/20. Pay attention to vendors which make only 20% of your supplier base with 80% on total spends. This way you will keep under control and monitoring greater cost reduction opportunities than spreading your attention to the whole supplier base losing capacity to be concentrated on high value contracts and tenders. - Look for opportunity to reduce costs together with your preferred suppliers
Overview of the whole supply chain together with preferred vendor can discover market opportunity to share the cost savings achieved at the expense of sharing knowledge and expertise. - Regularly conduct QPR with your core suppliers
Quarterly Performance Reviews to make assessments of suppliers’ performance with properly established and agreed KPIs can drive innovation and support sustainable relationship for incentives to obtain mutual competitive advantage. - Conclusion
M&S is to bring ever needed development opportunities to its customers and procurement optimizations to build partnership relationship with organizations to have a part of play in successful performance and outstanding deliverables.