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Cost Management vs Cost Leadership

Are you struggling with cost management? Or, are you striving for cost leadership? It is more than a difference in semantics.

By ·
By ·

From my archive of blogs written for the readers of the SCMR website, here is one of my favorites.

Are you struggling with cost management? Or, are you striving for cost leadership? It is more than a difference in semantics.

A few years ago, immediately after presenting a workshop at the ISM International Conference, I was approached by a member of the audience. He introduced himself as the senior vice president of operations at a global retailer. He said that he really liked what I had to say about leading procurement transformation. He was interested in the subject because he recently was given responsibility for overseeing all “not for retail” (indirect) procurement for his company.

We exchanged business cards, and agreed to talk after the conference.

A few days later we reconnected by phone, and had a fast-paced conversation that lasted almost two hours.  At the end, he asked me to prepare a proposal that he could discuss with his CEO. I agreed to do so, but pointed out to him that – at that time – our firm had not done any procurement transformation work in the retail sector. Lots of other sectors, just not retail.

His response was indicative of the type of leader he was. He told me that if he wanted simply to match the performance of his retail competitors, then he would be looking for a consulting firm that had a strong retail background. His objective was to create the leading procurement organization in the retail sector – and for THAT objective, he wanted to learn from the best practices across all industries. A week later, we were hired (he was a dynamic decision maker), and the company built a leading-edge procurement capability.

In summary, his idea was classic, and bears repeating:  you won’t become the leader in your industry by imitating your competitors; you CAN become the leader by adopting the best practices from all industries into your business (and being the first to do so).


About the Author

Robert A Rudzki
Robert A. Rudzki is a former Fortune 500 Senior Vice President & Chief Procurement Officer, who is now President of Greybeard Advisors LLC, a leading provider of advisory services for procurement transformation, strategic sourcing, and supply chain management. Bob is also the author of several leading business books including the supply management best-seller "Straight to the Bottom Line®", its highly-endorsed sequel "Next Level Supply Management Excellence," and the leadership book "Beat the Odds: Avoid Corporate Death & Build a Resilient Enterprise." You can reach him through his firm's website: www.GreybeardAdvisors.com

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From the May-June 2017
Too often, working capital pressures roll over supplier relationships without regard for what happens to supply chain risk. But now that new supply chain financing tools and techniques are proliferating, companies have a fresh chance to implement a coherent business strategy that balances the legitimate concerns of the buyer’s finance department with those of the company’s supply chain management experts.
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