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Value-Focused Supply: Linking Supply to Business Strategies

The ongoing pressure to cut sourcing and procurement costs is certainly understandable. But simply saving money on external spend will no longer be enough to survive, let alone prosper, in the years ahead. What’s needed instead is a new, longer-term approach that closely links supply management with business strategies. We call this breakthrough technique Value Focused Supply.

By ·

Over the past two decades, companies worldwide have saved hundreds of billions of dollars by aggressively applying competitive sourcing techniques to their spend base.  Companies gained control over 50, 60 or even 70 percent of their revenue that flowed to suppliers.  Information technology enabled companies to gain visibility into what they were spending, where and with which suppliers.

By spend aggregation across business units and geographies and concentrating spend with fewer suppliers, companies established leverage they never realized they had. Standardized approaches to sourcing brought rigor and discipline to both fact-finding and analysis. E-tools enhanced competition, improved decision-making, and sped up sourcing processes.

Looking back over the past 20 years, it is clear that competitive sourcing created significant value for companies by driving major cost savings directly to the bottom line. However, A.T. Kearney’s 2008 Assessment of Excellence in Procurement (AEP) global research found that the savings gap between “leader” and “follower” companies had shrunk by half just since 2004. Continued attention to competitive sourcing will remain necessary just to keep up…

In this environment, just saving money on external expenditures will not be enough to survive, let alone thrive, in the years to come. Companies must find and obtain additional value from their supply relationships. The supply network needs to contribute holistically to the company via innovation and growth, asset utilization, sustainability, risk management and overall competitiveness as well as cost.

These new, more advanced Value Focused Supply (VFS) strategies are the target of this article.

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Download Article PDF

Over the past two decades, companies worldwide have saved hundreds of billions of dollars by aggressively applying competitive sourcing techniques to their spend base.  Companies gained control over 50, 60 or even 70 percent of their revenue that flowed to suppliers.  Information technology enabled companies to gain visibility into what they were spending, where and with which suppliers.

By spend aggregation across business units and geographies and concentrating spend with fewer suppliers, companies established leverage they never realized they had. Standardized approaches to sourcing brought rigor and discipline to both fact-finding and analysis. E-tools enhanced competition, improved decision-making, and sped up sourcing processes.

Looking back over the past 20 years, it is clear that competitive sourcing created significant value for companies by driving major cost savings directly to the bottom line. However, A.T. Kearney’s 2008 Assessment of Excellence in Procurement (AEP) global research found that the savings gap between “leader” and “follower” companies had shrunk by half just since 2004. Continued attention to competitive sourcing will remain necessary just to keep up…

In this environment, just saving money on external expenditures will not be enough to survive, let alone thrive, in the years to come. Companies must find and obtain additional value from their supply relationships. The supply network needs to contribute holistically to the company via innovation and growth, asset utilization, sustainability, risk management and overall competitiveness as well as cost.

These new, more advanced Value Focused Supply (VFS) strategies are the target of this article.

SUBSCRIBERS: Click here to download PDF of the full article.

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Third Party Risk: Too Close for Comfort
You’ve got a handle on many of the potential supply chain "disrupters" that can paralyze your business. But the real risk is embedded in areas you may have overlooked.
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From the December 2017
This is a comprehensive guide to services, products and educational opportunities targeted specifically to supply chain professionals. As with years past, we’re also featuring several articles we trust will offer food for thought in your supply chain throughout the coming year.
Transportation Trends: The last mile, history repeating
Economic Outlook: A Complex and Uneven Scenario for Global Supply Chains
View More From this Issue
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