The aircraft manufacturer also is a striking example of how integrating purchasing early in the product development process can optimize global sourcing opportunities. The wing of Boeing's new 787 is being designed and manufactured in Japan leaving the aircraft manufacturer with little more than an assembly role in the production of the aircraft. Yet by taking maximum advantage of supplier collaboration, Boeing has improved the product's features and reduced overall cost.
Deploying consistent processes and tools across business units and operating companies lays the foundation for aggregating spend data. Together with streamlining the requisition and approval process, common processes and tools can build the fact base to instantly understand what you are spending on major categories, as well as just how fragmented or concentrated your supply base actually is.
Capturing accurate spend information is critical to understanding a company's exposure to one supplier. Aggregated data support fact-based negotiation and help reduce your strategic supplier base (and associated costs). Once your strategic supply base has been consolidated, consistent processes and tools can help ensure that you buy the right product from the right supplier at the right time, driving those responsible for requisitioning toward standard items from approved or preferred suppliers.
Standardized reporting of performance metrics provides a consistent view for the company's executives on supplier performance. It also establishes expectations for suppliers during the sourcing processes. Suppliers get a chance to provide feedback on the company, for example information that can help reduce the cost of doing business.
The use of consistent front-end processes for requisitions, approval, purchase orders and change orders helps ease back-end processes as well. Standardized processes involving the approval of requisitions, rather than invoices, limit the leakage of purchases to non-approved suppliers or for non-standard items. They reduce the cost of managing the number of items as well. And by easing access to contract terms they help ensure compliance.
High-performance businesses in your industry are already boosting gross margins by sourcing more direct materials globally and in low-cost countries.
Combining low-cost contract manufacturing with buy-brand-sell strategies has not only helped them tackle the problem of low-margin products, it has actually boosted growth by enabling profitable expansion into complementary product lines.
Because they have made procurement a strategic function, equal in stature to engineering, product development, logistics and supply chain, these high performers are minimizing total landed costs and increasing the overall reliability of their supply chains.
By integrating purchasing earlier in the product development process they also have slashed the cost of product design. And compliance, too, has significantly improved thanks to the deployment of consistent processes and tools right across the business.
The opportunities for substantial savings in terms of both margin improvement and revenues from these capabilities are real. Isn't it time you joined the industry leaders on the path to high performance?
About the Author: Paul D. Loftus is a managing partner with Accenture and currently leads the Industrial Equipment Practice within North America. He has extensive skills and experience in business strategy, customer insight, supply chain management, sales force effectiveness, product development, service management, manufacturing, warehouse, distribution, finance and accounting.