The Cost Dilemma

Add comment March 29th, 2007 David Bush - Iasta

On the same day Purchasing ran an article on how buyers are taking aim at costs, Purchasing also ran an article on how it’s not just about cost. Even more amusing is that the first article is about Sun Microsystems while the second article is about IBM.

The first article notes how Sun’s supply base development managers now set cost targets for new Sun products early in the design process and then review the design to make sure those cost targets are met while the second article notes that, at IBM, the Procurement Brand Management teams help define the system offerings and the architecture of the products that the Systems and Technology Group ultimately designs to help ensure that commodity strategies that were developed by procurement and individualized for various IBM brands are used in design.

In other words, buyers are taking aim at costs not by trying to beat up suppliers on margin, but on working with the engineering teams to try and design, better, more efficient, more cost-friendly products. By identifying alternate materials, alternate parts, and alternate configurations, some times significant cost savings can be found. Remember, most of the cost is built in during the design phase, so getting it right up front insures that costs during the sourcing phase will be much more in-line with initial expectations.

Entry Filed under: General, Supply Management Best Practices, Technology