It’s not an exercise for the faint of heart. It takes a lot of work. But, it’s the kind of work all procurement professionals should take the lead in doing, in collaboration with their counterparts.
John Biagioni is a self-professed "numbers guy". He has to be. As president of Dynisco, a major company that manufactures materials-testing equipment and extrusion-control monitors for the highly competitive plastics industry, he can’t let emotion and impulse dictate his decisions. And his staff feels the same way, especially Kevin Dailida, senior director for supply chain and operations, and Matt Miles, DFMA (design for manufacturing and assembly) and value engineering manager.
Together, they lead efforts to quantify as much as possible about their manufacturing operations to ensure they’re building to the highest quality at the lowest cost. They recently described their internal processes at the Boothroyd Dewhurst DFMA conference in Rhode Island. There are some interesting lessons for manufacturing procurement in what they had to say.
For example, they talked about their process for “should costing” a product before proceeding to manufacturing. They begin, they said, by breaking down the cost components, including raw material, transportation, direct labor, indirect labor, scrap, productivity-enhancing technologies, overhead, energy, regulations, and other relevant components.
If that’s all they did, they would be taking a giant step toward understanding their costs. But they go further. They build a quantitative model of the costs they’ve identified so they can study how to reduce them, including the potential for using DFMA principles to adjust the product design and cut the number of parts. That gives them information they can use to negotiate and leverage spend with suppliers.
It also puts them on a path to developing the total landed cost--freight, insurance, duties, fuel surcharges –and total cost of ownership of the product--inventory carrying costs, packaging costs, the costs of poor quality, and a variety of risk costs– so they can truly analyze the potential for low-cost country sourcing.
It’s not an exercise for the faint of heart. It takes a lot of work. But, it’s the kind of work all procurement professionals should take the lead in doing, in collaboration with their counterparts in engineering, finance, and other functions. And as they do, they will not only streamline procurement operations and product development, they’ll be helping their companies be more profitable.
from Procurement Leaders Blog http://ift.tt/1HGMH08
This content was assembled for you by the YQ Matrix platform
The views expressed in this post and throughout the series are the autor's own and not intended to reflect the views the YQ Matrix platform, its users or any associated organisations.
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