Purchasing just ran a useful case study highlighting how the BASF procurement organization attempts to influence spend in multiple ways by getting involved in the R&D process. It's one of the few studies I've read outside of discrete manufacturing (BASF is a global chemicals company) that discusses the challenge, opportunity and tactics involved in influencing cost before it is engineered into a product. While for many companies such tactics represent a huge opportunity -- I've heard estimates ranging from 50% to 85% of cost that are engineered into products in the design phase cannot be taken out -- few are using the latest technologies and approaches that can make it easier for procurement to help R&D teams design with cost in mind.
I was in a meeting last week where someone suggested that CAD and PLM providers have done a poor job so far helping engineers understand cost tradeoffs (relative to engineering ones). But I would add to this debate by saying the Spend Management and ERP providers have done an equally poor job in helping to drive cost out of the equation before it even enters it. Given these limitations on traditional providers that tackle design and cost management, where can companies turn to in this area? Akoya and Apiori, are two technology vendors that companies are starting to use (albeit both are very small organizations that have gone through significant executive restructuring in recent years).
But the other place to turn, in what can be an informal or less structured way than software driven approaches to tackle design-stage cost management, are your suppliers, as the Purchasing article suggests. This holds true in both discrete and process industries. As an example here, BASF coaches new suppliers with innovative materials on the best ways of getting into the organization. In one case, "BASF's procurement department was made aware that a polymer additive supplier wanted to conduct business with the company. Procurement coached the supplier to be proactive in setting up technical meetings with BASF's research group to understand the technical issues facing each business, developing products to meet those needs and following through on the project to final evaluation and launch." Which is further proof of the benefits of focusing on supplier development at all stages of a relationship versus simply as a tool to reduce cost and risk within a production spend environment.