With no further ado, Spend Matters US' own Jason Busch began the motion, stating: "This house believes that cost reduction should not be the CPO's main priority." Before watching the video, you should know that Jason had just arrived on the late red eye from Chicago a few hours before. He believes that Peter clearly had it in for him putting him up against some of the most senior ranking practitioners and academics in the UK -- not to mention thrusting a pint of beer into his hand before he took to the stage and telling him to debate in the Oxford style (something he had no familiarity with)...
Jason suggests that as a core strategy, you may drive initial savings with a pure focus on cost reduction, but you're more likely to actually increase your costs over time. This methodology is synonymous with asking suppliers to reduce costs zero-sum style.
Take global sourcing as an example. Companies previously went offshore to drive massive bottom line improvement, but today there's a real decline in the ability to sustain savings in this manner. After all: labor rates rise, currencies change, and we must also consider the societal toll of these decisions (child labor, cutting corners in terms of quality, etc.).
Most important, our proposer of the motion argued, CPOs must turn their attention to bigger areas, broadening their agendas! As one example, they need to focus on supply risk management strategies in their totality, not as an immediate outcome or "band aid." After all, how can you possibly focus on solely cost reduction without into account broad political and global issues, not to mention commodity prices, weather, etc.?
(Hang in there for the end, where Jason makes a great point...about Heinz ketchup.)
Stay tuned for the next post in this series, where Andrew Cox of the International Institute of Advanced Purchasing and Supply makes his rebuttal to the argument.
- Sheena Moore