Emerson, LCCS, and Spend Management

A friend recently sent me an excerpt from the book, Performance Without Compromise, which tells the story of how Emerson Electric rebounded from tough losses to become a "best cost" producer. For those who follow best-practice companies when it comes to low-cost country sourcing, it will be come as no surprise that Emerson was thinking about becoming a "best cost" manufacturer decades ago, even before the firm launched significant procurement operations in China and other regions. As background, Emerson "responded to rising global competition in the 1980s by defining a new Best Cost Producer Strategy. The idea was to not compete exclusively on price but rather on value -- the optimum combination of products, services, and pricing -- as perceived by our customers: best cost, not lowest cost." Ultimately, Emerson would follow-up on this strategy by becoming one of the best sourcing organizations in the world that was able to exploit LCCS savings. But you won't hear much about their LCCS successes, for they keep it close to the chest. But I did find one source that describes how Emerson made their moves into to low-cost regions in general. For companies beginning to think about the move from cost management to Spend Management -- a topic that we'll be exploring more in the coming months -- Emerson is a great case example to look at.

-Jason Busch

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