Spend Management Goes Upstream (Part 2: Starting The Quest)

Without question, the bottom line benefits that Spend Management can bring within the strategic and tactical procurement function are huge. But for manufacturers -- and any company that is involved in designing or specifying products that will eventually go to production -- the holy grail of Spend Management transcends procurement. Indeed, the chase for the cost chalice must lead companies upstream -- a place where few procurement and operations organizations have been able to historically exert influence in the past. But the key here is not conducting Monty Python-esque land grabs into design territory or getting discouraged unnecessarily from the wrong type of interactions with designers. In other words, there's no need to end up with hard feelings upstream. So if you find yourself mouthing off the following phrases after interactions with designers ...

"I don't want to talk to you no more, you empty headed animal food trough wiper. I fart in your general direction. Your mother was a hamster and your father smelt of elderberries."

... then you're doing something wrong. Stay positive, and change tracks. Your goal, if you choose to accept it, should be to get critical cost and related information back into the hands of designers on a sustainable basis, providing them with the ability to make the best possible decisions. But no one said it's easy. In other words, "So, brave knights, if you do doubt your courage or your strength, come no further!"

OK, I've given enough away about my taste in comedy. Back to the subject at hand. Historically, designers and engineers have not exactly been unnecessary big spenders (like those sales executives who insist on flying first and ordering the Silver Oak -- a mediocre and way overpriced Cab, in my book -- at Morton's every night of the week). But given their point role in coming up with and designing new products, designers have historically had to make real-world decisions in a vacuum with only a partial lens into the production impact of their actions -- and almost always without the complete intelligence picture to make the best total cost decisions. And that's because even in the most collaborative companies today, designers almost always have an incomplete perspective into how trade-offs can influence materials and labor costs, product quality, and even warranty claims and production use further downstream.

In the best case, some companies have common part libraries and preferred supplier relationships they can leverage to bring some costing and related information into their design process. But rarely do engineers and designers go beyond looking at this type of information in making decisions and tradeoffs. Why? Because their primary incentive is to bring products and designs to market on-time, using only high-level costing and other guiding elements. And today, the costing and other intelligence they incorporate into designs only needs to right on a macro-level for them to hit adhere to expectations (versus a part or even a feature one). This leads companies to unnecessarily lock-in cost -- and other elements -- in the design phase, creating lower-margin and higher risk products and supporting services that last as long as the end product survives in the market.

Jason Busch

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