“Are Your Supply Chain Savings Viewed with Skepticism? – Showing Value (Part I) ”

A client of ours, who is a VP of Supply Chain Management, jokingly refers to the historic challenge that Supply Chain dollars are often viewed as being very different than REAL dollars. In a sentence, he captured one of the most fundamental challenges facing the procurement and supply chain profession.

Just in case you’re not sure what I’m talking about here, take a look at the questions listed below. Have you ever been asked some, or all, of these questions? If you’re typical of most supply managers, these questions are very familiar.

*Are these savings real?
*Are these numbers net of inflation?
*What are these compared against? What is the baseline?
*Where are the savings? I can’t find them on my bottom line.

(Note: this figure is © Copyright Greybeard Advisors LLC)

When I first moved from a CFO career track to heading up procurement and transportation at Bethlehem Steel (back in the mid 90s), I became acutely aware of this issue. My new boss was the President and COO. In our first meeting after I became head of procurement, he told me the following: “Your predecessor (who had just retired) kept telling me that procurement saves this company millions of dollars every year. I never could find those dollars on the income statement.” That simple statement caused us to focus heavily on creating a methodology and tracking system that met key design criteria – from the perspective of our internal clients.

In the next several postings, we’re going to delve into this challenge – and elements of the solution. This is a subject that directly influences your credibility – so join us as we go through a short but important journey.

(Note: portions of this blog series are based on the author’s book “Next Level Supply Management Excellence” – a sequel to the bestselling book “Straight to the Bottom Line® )

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