dinsdag 18 januari 2011

Interview on should cost modelling

Some days ago, I responded to a post on a blog, which was actually a respons on another post on a different weblog, which, on its turn, was based upon an interview about shoud cost modeling. Still following me?
Well, in this post you'll find this interesting interview about should cost modelling. it is an interview with Tim Reis (Sourcing Manager).

Some points I want to highlight of this interview are:
- the importance of the distinctions you should make between different suppliers. The cost of making one pen will be higher than the cost of the same pen when making millions of those pens a year (economies of scales, discounts).

- another point which is very important is the preparation including the data integrity. I agree on that part: the model is as good as your data is! But bear in mind that even less good models can be useful in order to extract the right data from your supplier. This brings us to another interesting point of Mr. Reis:

- Sharing the ownership of the model

The two last points above combined, takes us to an neglected point in the interview. Cooperate with your supplier. Fill in the data together, look together for cost reductions, improvements and potential value increases! Use the model to go beyond the old-fashioned byer-supplier relationship and cooperate instead of just negotiating

Another remark is that suppliers might be very hesitant with disclosing information, especially when it concerns data about their production processes as this may assure their competitive advantage. And as Reis is talking about products which were not sourced before, there is a high chance that you have to contact new suppliers, which are probably even more hesitant to disclose sensitive information as trust has still to develop between your organisation and the new supplier.

Furthermore a general remark: Bear in mind, that how good your should cost model is, and even if it is indicating that the supplier's price is too high, this does not mean that the price is going to be reduced by your supplier. It also depends on several other contextual factors and especially on the power your organization has towards the supplier.

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