tag:blogger.com,1999:blog-38640167842904750252024-03-06T21:03:35.151+01:00Supply Chain Management - ProcurementOn this blog I'll write about Supply Chain Management with a focus on Procurement. Besides that you'll find links and information related to these subjects.
The aim is to display my view on some interesting topics related to Strategic Supply Chain Management and Procurement and get other people thinking about it.Unknownnoreply@blogger.comBlogger33125tag:blogger.com,1999:blog-3864016784290475025.post-60808909689552973392014-01-19T09:48:00.001+01:002014-01-19T09:50:40.597+01:00A future of 3D printing for the consumer market<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Existing
for more than 20 years for specific industries and prototyping, 3D printing
(additive manufacturing) is crawling out the shadow. <span style="mso-spacerun: yes;"> </span>It’s getting more and more attention and
according to some people a revolution is started. Whether a revolution or maybe
an evolution, it sure is more than just a trend. The past two decennia, the
techniques of 3D printing have proven their value, and the growing attention of
media and business (in very different industries) will function as an
accelerator for the 3D printing market. The rising stocks of 3D printing
manufacturers show this clearly. </span></span><br />
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">It is
difficult to point out what exactly can be expected from 3D printing, that’s
why the title of this blog is ‘A’ future of 3D printing instead of ‘The’ future
of 3D printing. Nevertheless, I like to share some of my thoughts (and
questions) what effect this technology <i style="mso-bidi-font-style: normal;">might</i>
have on the near future if the present high rate of developments in the 3D
market is continuing. And because it’s a Saturday night, I’ll stick to thoughts
and will save the analyses and calculation maybe for other posts…</span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<u><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">3D
printing consumer market</span></span></u><span lang="EN-US" style="mso-ansi-language: EN-US;"><br /><span style="font-family: Calibri;">
As the 3D printers are getting more advanced the products which are
manufactured are getting also more and more advanced and are used in several
high-tech end products like airplanes and cars. But also in other areas like the
dentistry and food markets 3D printed products are used. <br />
Besides the attention of the industry, the attention of 3D printing for the consumer
market is increasing, as prices of printers are starting to decrease.
Nevertheless, there is still some work to do before this market potential can
be captured as todays’ consumers will only be satisfied when products or
services are user-friendly (easy in use, ready for use, plug and play)<span style="mso-spacerun: yes;"> </span>and not too expensive. <br />
Some of these hurdles still have to be taken are in the areas of costs/price, materials
(availability and types of-) and quality of the ‘output’ of the ‘low-budget’
printers. Besides that, manufacturers must be ready to sell products by
‘sending’ the printorder and software will need to be developed such that
consumers can design (program) their own products in an easy way (Or better: ‘printing
the picture I just made with my tablet or smartphone’).</span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Currently
we see that companies are indeed taking steps to develop and enter the consumer
market. For example we see do-it-yourself kits ‘ of 3D-printers’ far below the
€1000, the type of materials which can be used for 3D printing are increasing
(metals, plastics, even food), 3D Systems (3D printer manufacturer) has
announced a collaboration with Intel which is developing 3D scanners for
tablets, and so on.</span></span></div>
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<div style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Besides the
hurdles mentioned above which have to be taken in order to reach the crossover
point where consumers are widely accepting the 3D printing technology, it is
also important for organizations to look for collaboration. Collaboration
between larger brands (who are prepared<span style="mso-spacerun: yes;">
</span>to sell their product via this new ‘sales -channel’), 3D manufacturing
companies and software-suppliers is a necessity for bringing 3D printing to a
wider public. Companies which are willing to capture a significant market share
in the 3D printer market for consumers will need to start now with making
investments, <span style="mso-spacerun: yes;"> </span>to enjoy benefits when that
crossover point is reached. </span></span></div>
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;"><br /></span></span><br />
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<u><span style="font-family: Calibri;">3D printing in practice</span></u></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">How this
might look like in practice? I don’t know, but as I see it, there are multiple
(no, even more than multiple) scenario’s how and where 3D printing can be used.
Will 3D printing at home be the next normal? Or will there be a sort of ‘printshops’
or ‘print-houses’ on each corner of the street where you can collect your 3D
printed items which you just ordered on Amazon or programmed at home with your
tablet?</span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Logistics</span></span></i><span lang="EN-US" style="mso-ansi-language: EN-US;"><br /><span style="font-family: Calibri;">
3D printing will have a significant impact on logistics. Without getting into
detail, think about <span style="mso-spacerun: yes;"> </span>inventory
management. Some products aren’t<span style="mso-spacerun: yes;">
</span>necessary to have in inventory if you have 3D printing technologies in
house (though you still have to have the raw material in stock, but with the
same material you may be able to make multiple type of products, so in the end
you have less inventory). Furthermore the decoupling point will be more
flexible, it’s a complete new sales channel for companies. Production costs
might decrease as well as transportation costs. And so on.</span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Challenges</span></span></i><span lang="EN-US" style="mso-ansi-language: EN-US;"><br /><span style="font-family: Calibri;">
But as all innovations do, 3D printing will bring new challenges. Think about
plagiarism of ‘print orders’ of products? And how often are you allowed to
print your newly bought product via de 3D printing channel? </span></span><span style="font-family: Calibri;">Can it be
copied? <span lang="EN-US" style="mso-ansi-language: EN-US;">Can the printer be
hacked? </span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Another
challenge will be responsibility? Who do you account for malfunctions during
the printing process? </span>Is it the owner of the printer? The manufacturer? <span lang="EN-US" style="mso-ansi-language: EN-US;">Or the ‘Amazon’ who is sending you
the print order?</span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">What about Ethics?
Are there any guidelines for this? Are you allowed to print guns? Will the
current regulations of the government do, or are new regulations necessary?</span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">These are
just some of the many questions which will rise when getting closer to the
aforementioned crossover point.</span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">New businesses</span></span></i><span lang="EN-US" style="mso-ansi-language: EN-US;"><br /><span style="font-family: Calibri;">
In order to cope with these challenges, new (types of) organization will come
into being to fill the gaps created by the new 3D printing market. Thinks about
3D printer services who provide maintenance to 3D printers, brokers who will
take responsibility for the quality of printing jobs send from ‘Amazon’ to the
consumer. </span></span></div>
<br />
<br />
<div style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">If you took
the time to read the article, you know it was just to share some of my thoughts
on 3D printing which was certainly not exhaustive. Nevertheless, I hope you
liked it and made you think about 3D printing for the consumer market.</span></span></div>
<br />Unknownnoreply@blogger.com13tag:blogger.com,1999:blog-3864016784290475025.post-6002622945875942912013-04-18T15:18:00.000+02:002013-04-18T15:18:44.216+02:00The future frontier of Procurement: Realtime insights and predictive analytics
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">I’ve just
read two interesting blogpost of Joe Payne about predictive analytics in
procurement.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Although I
definitely see the value of <span style="mso-spacerun: yes;"> </span>'predictive
analytics', I think the definition itself for the content of his blogposts is
to narrow. It’s just scenario 3 in which there is something about 'predictive
analytics': ‘<i style="mso-bidi-font-style: normal;">provides a forecast out for
the year based on’</i>.</span><span lang="EN-US" style="color: #727272; font-size: 9pt; line-height: 115%; mso-ansi-language: EN-US;"> </span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">I think 'predictive
analytics' is (a very important) part of a greater whole. At the same time I
must admit I haven’t got the right label for that ‘whole’, but it could be something
like: ‘<i style="mso-bidi-font-style: normal;">Real time insights and Predictive
analytics in Procurement’</i>, ‘<i style="mso-bidi-font-style: normal;">Procurement
Excellence 2.0’</i>, ‘<i style="mso-bidi-font-style: normal;">Managing the now
and the future of spend</i>’, ‘<i style="mso-bidi-font-style: normal;">Insights
based decision making for now and the future</i>’, and then probably a somewhat
catchier name… <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">But as you
see, the key elements are mainly <i style="mso-bidi-font-style: normal;">now,
future, decision making, realtime insights</i> and <i style="mso-bidi-font-style: normal;">predictive.</i> What I want to make clear with those non-catchy names
is that a new version of procurement is around in which <u>Operational decision
making in procurement is based on realtime information and strategic decision
making is based on predictive analytics.</u> <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">I named it
a ‘new version’, but ‘upgrade’ is perhaps a better word, because most traditional
procurement parts are still necessary, or better: they are the building blocks
for the upgrade (sourcing strategy, purchase to pay, spend analysis, category tree,
master data management). <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">The change
for the procurement department will mainly be in their way of working: how to
interpret the information and how to use it to make better decisions. Cooperation
with IT experts, content expert (to define which information is useful) and
analytic experts to assure the right input/output, software selection and
maintenance, master data management is a prerequisite in order to succeed.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;"><span lang="EN-US" style="mso-ansi-language: EN-US;">It is
something new (at least for procurement) and it will cost some time and money
to implement it, but it will become the new frontier in procurement. And as </span><span lang="EN-US" style="mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">Joe Payne mentions in his blogpost:</span><span lang="EN-US" style="mso-ansi-language: EN-US;"> </span><span lang="EN-US" style="mso-ansi-language: EN-US; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin;">’ <i style="mso-bidi-font-style: normal;">The investment will be substantial, but so
is the payback</i>.’</span><span lang="EN-US" style="mso-ansi-language: EN-US;"> <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="color: #727272; font-family: "Verdana","sans-serif"; mso-ansi-language: EN-US;"><a href="http://www.strategicsourceror.com/2013/01/predictive-analytics-and-future-of.html"><span style="color: blue;">Predictive
Analytics and the Future of Spend Management (Joe Payne)</span></a><o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="color: #727272; font-family: "Verdana","sans-serif"; mso-ansi-language: EN-US;"><a href="http://www.strategicsourceror.com/2013/04/predictive-analytics-and-future-of.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+strategicsourceror%2FFkxf+%28The+Strategic+Sourceror%29"><span style="color: blue;">Predictive
Analytics and the Future of Spend Management Part II (Joe Payne)</span></a></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span></div>
Unknownnoreply@blogger.com6tag:blogger.com,1999:blog-3864016784290475025.post-87205766763835783962013-03-16T15:05:00.002+01:002013-03-16T15:07:08.544+01:00Video: Should Cost Analysis WebinarI found an interesting video on youtube about a webinar on Should Cost Analysis which I wanted to share with you. The webinar is organized by Supply Chain Brain and the content is deliverd by Genpact.<br />
<br />
<a href="http://www.youtube.com/watch?v=-hNCM0VCH9A" target="_blank"><strong><span style="color: purple; font-size: large;">Click here for the video</span></strong></a><br />
<br />Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-3864016784290475025.post-7791532995401418552013-01-10T09:07:00.001+01:002013-01-10T09:25:55.600+01:00Information sharing in the supply chain. Part 3: Understanding the vertical information exchange process<span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">In the <a href="http://scmprocurement.blogspot.nl/2013/01/information-sharing-in-supply-chain.html?spref=tw" target="_blank"><span style="color: #cc6411;">part 1</span></a> of this series, I highlighted the importance of
the IT-infrastructure. In the <a href="http://scmprocurement.blogspot.nl/2013/01/information-sharing-in-supply-chain_8.html?spref=tw" target="_blank">second part</a> I zoomed in on types of information
that can be exchanged and why it is beneficial to share those types of
information. This post I will discuss the process of information sharing, clarifying why information may be shared or not.</span></span></span><br />
<span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;"></span><br />
<span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">The information exchange process is a complex process which is
influenced by many interacting determinants. Information will only be disclosed
if it is likely to serve certain<i style="mso-bidi-font-style: normal;"> </i><u>benefits</u>.
If it is more certain that disclosing a piece of information would lead to
benefits, organizations are more eager to share that information. However,
often it is difficult to know upfront whether benefits will increase, there is
always a level of <u>uncertainty</u>. Closely related to the expected benefits
by sharing certain information, is the<u>division of the benefits</u>. It is
important to have a fair division of the costs and revenues upfront in order to
maintain or improve the information exchange. </span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span><br />
<br />
<u><span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">Trust</span></u><span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;"> is another important determinant of the information
exchange process. If trust exists between (the people of) two parties, one is
more willing to disclose information because it is expected the other party
will handle the information in a proper way. </span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span><br />
<br />
<span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">Then there are <u>control mechanisms</u> (like NDA’s and penalties for
misuse). The more control mechanisms are in place, the more information is
expected to be exchanged. The level of control is highly dependent on the level
of secrecy and uniqueness of the disclosed information. Nevertheless, for some
types of information it is difficult to establish reliable control mechanisms.
It may also be the case that increasing control mechanisms is seen as an act of
distrust. A optimum balance should be established between trust and control in
order to increase information exchange. </span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span><br />
<br />
<span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">Another determinant of the information exchange process is <u>dependency</u>.
The lessdependent a party is on its buyer (or supplier), the more power it has
in the relationship. An organization can exert its power to force the other
party to disclose information. Although question marks can be placed at the
reliability of the information, because the information can be incomplete or
distorted by the weaker party in order to avoid an even higher level of
dependency. Other way around, dependency in a buyer-supplier relationship is a
mutual phenomenon. An equal and high level of mutual dependency increases the
level of information exchange because both are equally dependent on each other
and have no interest in a damaged relationship caused by the misuse of
information. </span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span><br />
<br />
<span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">With respect to information disclosure, the level of <u>vulnerability</u>
is determined by the impact and the chance of misusing the disclosed
information by the receiving party. The <u>impact </u>is determined by the type
and importance of information. The closer the information to the core of the
organization, the higher the impact and by that the vulnerability of the
disclosing organization, because if this information is misused, the
competitive advantage may be at stake. The impact cannot be seen apart from the
chance that information is misused, or in other words the <u>chance of
opportunistic behavior</u>. Opportunism is often referred to as the opposite of
trust. If trust is present in the relationship, the chance of misuse of
disclosed information (opportunism) is expected to be low,<s> </s>resulting in
a lower level of vulnerability. The higher the impact of misusing disclosed
information and the higher the chance of disclosing that information
(opportunism), the higher the level of vulnerability will be. Generally
speaking, less information is exchanged if a higher level of vulnerability is
present. </span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span><br />
<br />
<span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">Exchanging information is a process of giving and receiving, and not
just giving or receiving. Therefore <u>reciprocity</u>, which can be explained
as the process in which both parties in a relationship send and receive
information, is important in the information exchange process. If just one
party discloses information, the information flow will soon stop, because the
disclosing party is not getting anything in return; the relationship will be
damaged. </span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span><br />
<br />
<span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">Furthermore, the flow of information between organizations with the same
<u>culture</u> will be more fluent than if they have different cultural
backgrounds. Though, if a buyer and supplier have different cultures, it does
not imply that an organization never gets the information asked for, but they
may encounter some communicational barriers. </span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span><br />
<br />
<i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">Interaction</span></i><span lang="EN-US" style="mso-ansi-language: EN-US;"><br />
</span><span lang="EN-US" style="font-family: "Calibri","sans-serif"; mso-ansi-language: EN-US;">When trying to understand the information exchange with a specific
supplier, it is important not to focus exclusively on a single determinant,
because all other determinants will influence each other and the information
exchange process at the same time. The different determinants and the
interaction among them, make the vertical exchange of information a complex
process. This may clarify the gap between acknowledging the benefits of
exchanging information on the one hand and not exchanging the information on
the other hand.</span><span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZSncB5dmG6rwbgtBLsfmesjMR_-5fZhh43RASPPbCVHPYwthGhYJdxD30r4IsPxKabER4lIZcy2V-JUtjWtCI1toruLmvQ7Tc137PyCTu0L3mbvqZU-mIogZMk0xr0aKl4Pdi-IbvN2k/s1600/informationexchange.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZSncB5dmG6rwbgtBLsfmesjMR_-5fZhh43RASPPbCVHPYwthGhYJdxD30r4IsPxKabER4lIZcy2V-JUtjWtCI1toruLmvQ7Tc137PyCTu0L3mbvqZU-mIogZMk0xr0aKl4Pdi-IbvN2k/s1600/informationexchange.png" /></a></div>
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</div>
<div class="separator" style="clear: both; text-align: left;">
In the next post I'll will discuss some tools which can be useful for getting grip on the information flow of your relationship with buyers and suppliers.</div>
Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-3864016784290475025.post-35238195352189867882013-01-08T08:17:00.001+01:002013-01-08T08:28:56.090+01:00Information sharing in the supply chain – Part 2: Types of information and their related benefits<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">In the
<a href="http://scmprocurement.blogspot.nl/2013/01/information-sharing-in-supply-chain.html?spref=tw" target="_blank">previous post</a> of this series, I highlighted the importance of the IT-infrastructure.
In this post, the focus is on the types of information that can be exchanged
and why it is beneficial to share these types of information. <o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Although
buyers and suppliers may have contradicting goals (especially seen from a
conservative perspective), they have at least one goal in common: making profit</span><a href="http://www.blogger.com/blogger.g?blogID=3864016784290475025#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-US" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">[1]</span></span></span></span></a><span style="font-family: Calibri;">. Dependent
on contextual characteristics, buyers and suppliers will (try) to interact in a
certain way with each other (varying from transactional exchange to close
partnerships) to make as much profit as possible. In a pure transactional
exchange, both parties will only care about their own profit. In close
partnerships on the contrary, organizations try to create as much profit as
possible for the buyer-supplier relationship (<i style="mso-bidi-font-style: normal;">inter-firm profitability)</i> and divide the additional profit as a
result of the alliance in a fair way. The increase in inter-firm profitability
can be realized by increasing revenue and/or decreasing costs at the buyer
and/or supplier their processes. The <u>exchange of information</u> between the
two parties is an important prerequisite in order to increase the inter-firm
profitability. Examples of this may be the possibility to align and coordinate
processes across organizational boundaries<span style="mso-spacerun: yes;">
</span>or joint development of new products as a result of sharing information.
</span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<u><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Types of
information</span></span></u></div>
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Dependent
on the type of relationship and contextual characteristics (in its broadest
sense) the exchange of certain types of information, varying from operational
data to strategic knowledge, may result in an increase in inter-firm
profitability.</span></span><br />
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">The table below
reflects a selection of information types which may affect the inter-firm
profitability. The table provides also information about how the exchange of it
may affect the inter-firm profitability and the direction of the flow of the
information.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt; text-align: left;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Note: the
table is meant as an impression of the different types of information which can
be used for increasing benefits, the goal of the table is not to be exhaustive.</span></span><span lang="E<div class=" separator="separator" style="clear: both; text-align: center;">
</span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 10pt; text-align: left;">
<span lang="E<div class=" separator="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGA53kd7ximc7e3cXxP1Jk4nBaFpg_f4oHCmx7BaKbI25EFliAIdCIGmjzwSjSLIpZD9YEAGu9RaJOoCwqzXEZ0qGhEKFzZkOhe4x9x8xryTn7gdq2uAG64Ryt2NlMlFkiaox_DMDoKF4/s1600/Typesofinformation.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgGA53kd7ximc7e3cXxP1Jk4nBaFpg_f4oHCmx7BaKbI25EFliAIdCIGmjzwSjSLIpZD9YEAGu9RaJOoCwqzXEZ0qGhEKFzZkOhe4x9x8xryTn7gdq2uAG64Ryt2NlMlFkiaox_DMDoKF4/s1600/Typesofinformation.png" /></a></span></div>
<span lang="E<div class=" separator="separator" style="clear: both; text-align: center;"></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">While
sharing several types of information will obviously contribute to an increase
in profit, both parties are often reluctant to disclose information. Although
the level of information exchange will definitely be a result of the type of
relationship (transactional – cooperative) it surely is not the single factor
clarifying the lower level of information exchange than would be expected based
on the prospects of <span style="mso-spacerun: yes;"> </span>increasing profits
when increase sharing.<o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Which
reasons then are in place why information is not disclosed? In order to find
those reasons, we have to understand the process of information exchange by
revealing underlying determinants. This will be the subject in the next post of
this series.</span></span></div>
<hr align="left" size="1" width="33%" />
<div id="ftn1" style="mso-element: footnote;">
<div class="MsoFootnoteText" style="margin: 0cm 0cm 10pt;">
<a href="http://www.blogger.com/blogger.g?blogID=3864016784290475025#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10pt; line-height: 115%; mso-ansi-language: NL; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">[1]</span></span></span></span></a><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-size: x-small;"><span style="font-family: Calibri;"> Not taking non-profit organisations
into account<o:p></o:p></span></span></span></div>
</div>
Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-3864016784290475025.post-73063805857720188092013-01-02T08:26:00.003+01:002013-01-02T10:23:06.530+01:00Information sharing in the supply chain – Part 1: The IT infrastructure<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Due to a
combination of recent technological developments (such as smartphones/tablets,
wireless internet -WIFI, 4G-, social media, cloud computing and less expensive
storage capacity) access to information has increased and sharing of
information has been simplified. This has lead to an enormous increase in
worldwide information flows over the past few years – a trend that is likely to
continue for the foreseeable future.<o:p></o:p></span></span><br />
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">However, without
a well-organized informational infrastructure (informational processes,
policies concerning information sharing, information systems and governance
structure), the ever increasing flow of information will either result in
organizations suffering from leakage of valuable information or an overload of
information. On the other hand, organizations that proactively organize their informational
infrastructure in alignment with their corporate governance and strategy may be
able to capture the many benefits of the increased access to and sharing of
information.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">For many
organizations, the technological developments mentioned above have opened doors
to new levels of internal and external collaboration through the greater
exchange of information. An example of this is the so-called <i style="mso-bidi-font-style: normal;">Control Tower</i>. Control Towers are
cross-divisional organizations with system integrated “information hubs” that
provide increased visibility into the supply chain. In such a cross-divisional organization,
individuals continuously monitor and distribute filtered and integrated real-time
information, which is collected internally from several systems within their own
organizations and externally from organizations throughout the supply chain. This
information enables individuals to detect and act on risks or opportunities
more quickly. In addition to the flow of information, many organizations store
a lot of this (partly publicly available) information. Smart use of this ‘Big Data’
may lead to competitive advantages for organizations. Of course, to realize
these benefits, organizations will need individuals with the right analytical
skill set. A rise in the prevalence of technology enabled systems and big data
will therefore lead to a rise in the demand for individuals with the right analytical
skills to leverage these trends. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<u><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">IT-infrastructure</span></span></u><span lang="EN-US" style="mso-ansi-language: EN-US;"><br /><span style="font-family: Calibri;">
The Control Tower is only one example of an initiative that an organization can
undertake to integrate information from multiple sources - there are many more.
However, any initiative must first overcome several technical barriers that
exist due to the fact that most organizations have their own enterprise
applications and data. The figure below depicts a simplified, high-level view of
an organization’s IT-infrastructure. In the center you can see the
orchestration of services which is responsible for integration of front-end
services and ERP systems, such as SAP and Oracle. The pillar on the left represents
security services like authentication and system security. On the right,
another pillar represents the equally important governance services. This
category includes services such as user support and supplier services.</span></span><span style="mso-fareast-language: NL; mso-no-proof: yes;"><v:shapetype coordsize="21600,21600" filled="f" id="_x0000_t75" o:preferrelative="t" o:spt="75" path="m@4@5l@4@11@9@11@9@5xe" stroked="f"><span style="font-family: Calibri;">
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5wdt5opg5yDoNWSs9jgOug_R445bQhEsP69KXyWs7pcXaPVUgsoqdqbgt5FBYZuvqpIaofzOhf00TlSXPbQx5qv-bIfJIQ2gy3XZMv0S69F8myI_yALZWP85D_jHekXEtGeFaTQc7ey8/s1600/Hmodel.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="204" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5wdt5opg5yDoNWSs9jgOug_R445bQhEsP69KXyWs7pcXaPVUgsoqdqbgt5FBYZuvqpIaofzOhf00TlSXPbQx5qv-bIfJIQ2gy3XZMv0S69F8myI_yALZWP85D_jHekXEtGeFaTQc7ey8/s320/Hmodel.png" width="320" /></a></div>
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<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">The high
number of different software packages used within many organizations today makes
aligning these systems a complex task. This becomes even more difficult when organizations
want to integrate the systems of their supply chain partners into their own
IT-infrastructure. In general terms, there are two basic approaches to handling
the problem of integrations of multiple systems:<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">1)</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";">
</span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">New
organizations (or departments within an organization) are created that are
specialized in interfacing. These organizations integrate several systems by
using middleware and display all relevant information for the end-user in one
portal.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">2)</span><span style="font-size-adjust: none; font-stretch: normal; font: 7pt/normal "Times New Roman";">
</span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Software
vendors provide solutions by extending their software packages. For example, a
vendor that is specialized in S2P software extends its software package with
modules such as planning and inventory management.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Over the coming
years, the first approach is likely to outgrow the second because most software
vendors are specialized in certain modules and lack the expertise to develop
other modules (especially over the short term). Additionally, many organizations
prefer the relatively easy implementation of middleware over implementing a
complete new software package throughout the whole organization. This is mostly
because the former has less impact on departments while the latter presents
many challenges. This is especially true when organization’s current software
packages are working properly and individuals are comfortable with the current
state.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Finally, a possible
third approach may develop over time: software vendors may collaborate or even
merge in order to offer a more complete solution offering. Examples of this
approach include SAP, which acquired Ariba, and IBM which acquired Emptoris. By
doing so, these vendors offer a more extensive solution set for organizations while
at the same time overcome any knowledge gaps that may exist. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;"><u><span lang="EN-US" style="mso-ansi-language: EN-US;">Information
sharing process</span></u><span lang="EN-US" style="mso-ansi-language: EN-US;"> <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">IT-infrastructure
is very important but it is merely an enabler for information exchange. Assuming
that the technical solution is in place, several other hurdles may appear in
sharing information. These problems may show up when internally sharing
information, but especially appear when information sharing takes place outside
the boundaries of the organization. <o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Taking a
closer look at externally exchanged information, it is easy to identify two
distinct types: horizontal and vertical information sharing. Horizontal means
sharing information with other organizations that are complementing each other
(e.g., Philips and Douwe Egberts) or with competitors. Vertical sharing means
sharing with your suppliers and /or customers. Although there are many
advantages to exchanging information with buyers and suppliers, organizations
are often hesitant to exchange certain types of information.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">The remainder
of this series of posts concerns the vertical information sharing process. What
types of information is exchanged between buyers and suppliers? Which goals
serve the exchange of certain types of information? Why is information
sometimes not shared even though it obviously will result in an increase in
profitability? And last but not least, what can we do to control the information
sharing process in order to maximize profit? In the second part of this series,
we will focus on the types of information that can be exchanged and how this
may lead to benefits for organizations. The third post of this series
elaborates on understanding the information exchange process itself. Here we
take a closer look at the factors that drive information sharing and try to
understand why or why not organizations choose to share information. Finally, in
the fourth and final post of this series, we’ll share some advice for
optimizing the exchange of information as well as some of the pitfalls that
organizations often face.</span></span></div>
Unknownnoreply@blogger.com6tag:blogger.com,1999:blog-3864016784290475025.post-35517886880816735992012-12-30T09:57:00.000+01:002012-12-30T09:57:07.485+01:00Information exchange between buyers and suppliers
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Herewith an
announcement of a series of post concerning the information exchange between
buyers and suppliers. In this series answer are given on questions like: What types
of information are exchanged between buyers and suppliers? Which goals serve
the exchange of certain types of information? Why is information sometimes not
shared even though it obviously will result in an increase in profitability?
And last but not least, what can we do to control the information sharing
process in order to maximize profit?<br />
Before trying to answer these questions I start with a post on the <u>IT (infrastructure)
of organizations</u> because it is an important enabler and accelerator for
information exchange these days and therefore cannot be neglected. It shapes
the context in which it takes place.<br />
In the second part of this series, I will focus on the <u>types of information</u>
that can be exchanged and how this may lead to <u>benefits for organizations</u>.
The third post of this series elaborates on <u>understanding the information
exchange process</u> itself. Here we take a closer look at the factors that
drive information sharing and try to understand why or why not organizations
choose to share information. Finally, in the fourth and final post of this
series, I’ll share some advice for <u>optimizing the exchange of information </u>as
well as some of the pitfalls that organizations often face.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">I’ll hope
you will like this series and I want to invite you all to comment on it. Stay
tuned as the coming week the first post will appear.<o:p></o:p></span></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p><span style="font-family: Calibri;"> </span></o:p></span></div>
Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-3864016784290475025.post-69703982000095669862012-12-28T12:02:00.004+01:002012-12-28T12:17:41.883+01:00Book: Should cost modelsThis morning I was reading some blogs and websites on procurement, and suddenly I found an <a href="http://blog.sourcinginnovation.com/2012/12/24/an-informative-piece-on-making-better-decisions-with-cost-modelling.aspx?ref=rss" target="_blank"><strong><span style="color: #741b47;">article about should cost models</span></strong></a>.<br />
<br />
For those of you who followed my blogposts in 2010 and 2011, the content may sound familiar only somewhat less detailed than mine. In the blogpost I found a link to <a href="http://www.ism.ws/pubs/ISMMag/ismarticle.cfm?ItemNumber=23242" target="_blank"><strong><span style="color: #741b47;">another article about should cost model</span></strong></a> on which the post was based. It is a very interesting article which the authors have based on a chapter of their <a href="http://www.amazon.com/Better-Business-Decisions-Using-Modeling/dp/1606492667/ref=sr_1_1?ie=UTF8&qid=1356690805&sr=8-1&keywords=Better+Business+Decisions+Using+Cost+Modeling#_" target="_blank"><strong><span style="color: #741b47;">book about (several) cost models</span></strong></a> (Victor Sower and Christopher Sower). <br />
<br />
Although I get several requests a month from people who have read my blogpost on should cost modeling for more information or the examples it seems that there was some radio silence last year on should cost modeling (also from my side due to a busy time at my work with other procurement and scm related topics). But it is good to hear that the should cost modeling philosophy is still there. Every now and then a blogpost or book (or chapter in a book about it) appears and for me personally, it is good to read that the greater part of my blogposts are reflected in those messages, I guess it means that my philosophy back in 2010 made some sense.<br />
<br />
I've just ordered the book, and I'm very curious about the detailed content!<br />
<br />
Book<br />
Title: <span id="btAsinTitle"><a href="http://www.amazon.com/Better-Business-Decisions-Using-Modeling/dp/1606492667/ref=sr_1_1?ie=UTF8&qid=1356690805&sr=8-1&keywords=Better+Business+Decisions+Using+Cost+Modeling#_" target="_blank">Better Business Decisions Using Cost Modeling: For Procurement, Operations, and Supply Chain Professionals</a></span><br />
Authors: Victor Sower and Christopher SowerUnknownnoreply@blogger.com1tag:blogger.com,1999:blog-3864016784290475025.post-29338546775227878712012-03-07T12:03:00.005+01:002012-03-07T12:28:25.840+01:00Shift towards The Cloud<div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Many organizations (plan to) transfer their traditional arranged IT towards cloud-based solutions. Procurement IT solutions are not an exception here.<br />
<br />
There are many advantages of cloud-based solutions, ranging from financial advantages to the quality of information sharing and planning, but what exactly is meant by the cloud? What are the pro’s and con’s? How is the security arranged? <span style="mso-spacerun: yes;"> What are the difference among, SaaS, PaaS and IaaS? </span>How can I assure a solid and safe migration to the cloud? And so on...</span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;"></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Instead of writing a complete paper about ‘the cloud’ (because 'cloud-experts' will do a better job on this than I do) I provide some links to interesting papers which are easy accessible, may answer your questions and can provide you with some guidance for migration into the cloud. </span></span></div><br />
<div sizcache08308994418611804="2" sizset="36"><a href="http://intranet.nl.capgemini.com/getDocs/D537692E-895C-BDA8-A6B8-343A2BC86788/The_Cloud_Time_for_Delivery_PoV.pdf%7Cpage_id=" s_oid="http://intranet.nl.capgemini.com/getDocs/D537692E-895C-BDA8-A6B8-343A2BC86788/The_Cloud_Time_for_Del" s_oidt="0" target="_blank"><strong><span style="color: magenta;">The Cloud: Time for Delivery (PoV)</span></strong></a> (English)</div><div sizcache08308994418611804="2" sizset="36"><br />
</div><strong><a href="http://intranet.nl.capgemini.com/getDocs/7D00C973-7503-D713-0664-04A93EF376DA/Trends_in_cloudcomputing_-_Veilig_in_de_cloud.pdf%7Cpage_id=" target="_blank"><span style="color: magenta;">Trends in Cloud computing report: Security in the cloud, a matter of orchestration</span></a></strong> (Dutch)<br />
<br />
<strong><a href="http://intranet.nl.capgemini.com/getDocs/10645C3D-793D-C8A9-7077-56F95BB748FF/_TiC_Global_.pdf%7Cpage_id=" target="_blank"><span style="color: magenta;">Trends in Cloud computing report: Security in the cloud, a matter of Control</span></a></strong> (English)<br />
<br />
<div sizcache08308994418611804="2" sizset="35"><a href="http://intranet.nl.capgemini.com/getDocs/1B0F6B40-2C51-A9E6-35DC-39746E88846E/Cloud_Wheel.pdf%7Cpage_id=" target="_blank"><strong><span style="color: magenta;">Cloud wheel</span></strong></a> - practical guide for a succesfull migration to the cloud (Dutch)</div>Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-3864016784290475025.post-39010024831072305912011-12-06T17:23:00.000+01:002011-12-06T17:23:13.905+01:00The determinants of the vertical information exchange process<div style="text-align: center;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif"; font-size: 14pt; line-height: 150%;">Why information exchange between buying organizations and suppliers is limited while both parties know it is beneficial to share information.</span></i></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b style="mso-bidi-font-weight: normal;"><u><span lang="EN-US" style="font-family: "Calibri", "sans-serif";"><span style="text-decoration: none;"></span></span></u></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif";">Although buyers and suppliers may have contradicting goals, they have <i style="mso-bidi-font-style: normal;">at least</i> one goal in common: Making profit. <br />
When they (buyer and supplier) decide to cooperate they can increase their profitability. However, in order to increase the profitability and grasp the benefits of cooperation, <b style="mso-bidi-font-weight: normal;"><u>information sharing</u></b> between the buyer and supplier is a prerequisite. </span><span lang="EN-GB" style="font-family: "Calibri", "sans-serif"; mso-ansi-language: EN-GB;">They </span><span lang="EN-US" style="font-family: "Calibri", "sans-serif";">need to exchange information about their activities, processes, costs and value in order to map the overall picture of their relationship to come to a higher inter-firm profitability by aligning processes and activities on each other.</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif";">While it is widely acknowledged by buying companies and suppliers that sharing information is profitable for both of them, they are very hesitant to exchange any information. Although some reasons are obvious why certain information is not shared, those reasons do not clarify the complete behavior of the buyer and the supplier with respect to information exchange at all. This made me curious, I wanted to know why information is not exchanged, while both parties know it is profitable for them. And even more important what can buyers and/or suppliers do about it to improve the information exchange? What buttons do they have to switch in order to exchange more information and increase the profit of the buyer and the supplier.</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif";">In order to answer these questions, I conducted a study to open up the black box of vertical information sharing. I found several determinants of the vertical information exchange process which may clarify the reluctance of buying organizations and suppliers to share information. The determinants are also the buttons to switch in order to improve the information exchange. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><u><span lang="EN-US" style="font-family: "Calibri", "sans-serif";">Determinants of the vertical information exchange process</span></u></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif";">Several determinants of the vertical information exchange process are found: profitability (division/uncertainty), dependency, reciprocity, vulnerability (opportunism, impact), control, trust and culture. Each single determinant influences the information exchange process between a buyer and supplier. Besides this, it is important to notice the potential interaction among these determinants. In figure 1 the information exchange process between a buyer and supplier including the determinants is schematically depicted. </span></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjn7FpHGq2GLYAW6YYbDPEcolna76R7WPbnhe9sDWKokJwnSWDm3Dij7FPgRrj4egwRw4bXz3t-vuYCSWwRvZfZgrsYqn3-sLBHb8ILcc7TG4oek185P3YfXb43Ipik-CtNSCe1bMbxOJc/s1600/Information+exchange+process.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" dda="true" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjn7FpHGq2GLYAW6YYbDPEcolna76R7WPbnhe9sDWKokJwnSWDm3Dij7FPgRrj4egwRw4bXz3t-vuYCSWwRvZfZgrsYqn3-sLBHb8ILcc7TG4oek185P3YfXb43Ipik-CtNSCe1bMbxOJc/s400/Information+exchange+process.png" width="370" /></a></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif";"><br />
</span><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif"; font-size: 10pt; line-height: 150%;">Figure 1 Schematic presentation of the information exchange process</span></b><span lang="EN-US" style="font-family: "Calibri", "sans-serif";"><br style="mso-special-character: line-break;" /><br style="mso-special-character: line-break;" /></span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif";">In the middle of figure 1, the level of information disclosure is depicted which is subject to a direct influence of the first order determinants. It is a valid assumption that the first order determinants are influenced by other first order determinants and factors which have no direct influence on the level of information disclosure. These latter factors are called the second order determinants (not specified in this study). The arrows indicate the influence of the possible interaction among all determinants (1st order, 2nd order, n-order) and the level of information disclosure. The information exchange process takes place in a specific context (e.g. industry, market situation) at a specific point in time. Based on this figure, you can make a snapshot of the information exchange process between a buyer and supplier. This snapshot can serve as<span style="mso-spacerun: yes;"> </span>base for looking for opportunities for increasing the information exchange. <span style="mso-spacerun: yes;"> </span></span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Calibri", "sans-serif";">To find out more about this study, the determinants and how it affects the information sharing process, you can <a href="mailto:khllemmens@gmail.com?subject=Request%20for%20a%20copy%20(information%20exchange)"><span style="color: blue;">e-mail</span></a> me for a <u>free copy</u> of this study. </span></div><div class="MsoNormal" style="margin: 0cm 0cm 0pt;"><br />
</div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-3864016784290475025.post-83761068470515635472011-10-30T12:29:00.013+01:002012-01-19T09:28:45.884+01:00Innovation – the parallel between warfare and business<div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;"><i style="mso-bidi-font-style: normal;">In this article the impact which technological innovations may have will be discussed. <span style="mso-spacerun: yes;"> </span>It is an interesting and broad subject and the two pages to describe any of this is far too less. Therefore it must be obvious that my goal is not be exhaustive, but to point out some theoretical and practical topics on innovation in warfare and business in order to make you aware of it. Maybe it will even be useful to you in your way of doing business in the future.</i></span></span><br />
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<em><span style="font-family: Calibri;">- this article is part of a serie of articles called <u><a href="http://scmprocurement.blogspot.com/2011/10/strategic-decision-making-what-can.html">parallel between warfare and business</a></u> - </span></em><br />
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<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;"><em></em></span></span><u><span lang="EN-US" style="font-size: 12pt; line-height: 115%; mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Innovation in technology - <span style="mso-spacerun: yes;"> </span>invention of the tank</span></span></u><span lang="EN-US" style="mso-ansi-language: EN-US;"><br />
<span style="font-family: Calibri;">The idea for the tank already existed years before the first world war as a substitute for manpower</span><a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-US" style="font-family: "Calibri", "sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">[1]</span></span></span></span></a><span style="font-family: Calibri;">. Nevertheless, a prototype was never made at that time due to<span style="mso-spacerun: yes;"> </span>high costs and the necessity was not there (there was no war). When the first world war started, the development of the tank got accelerated; the first tanks were in use at small scale. The tanks were used to realize a breakthrough in the static defense lines consisting out of trenches and barbed wire which characterize the first world war. </span></span></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPwo0AHISLLK5ZMdWnswkkHXdCq0mYYFSexmmHbNSjN8qLfv8yt6-Osxpzn0ScQThuPg_3ET2e6Fy0f8KSgWA63zcNESc1o5H_c4DPDqrxTprgZlXWeIP41Nrm57SsMTKjAQe6kfyJQww/s1600/m2603drawing32shhh5.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="188" ida="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgPwo0AHISLLK5ZMdWnswkkHXdCq0mYYFSexmmHbNSjN8qLfv8yt6-Osxpzn0ScQThuPg_3ET2e6Fy0f8KSgWA63zcNESc1o5H_c4DPDqrxTprgZlXWeIP41Nrm57SsMTKjAQe6kfyJQww/s320/m2603drawing32shhh5.jpg" width="320" /></a></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt; text-align: center;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;"><span style="font-size: x-small;">Technical drawing of a 'United States'M26 Pershing heavy tank (<a href="http://www.wwiivehicles.com/usa/tanks-heavy/m26-heavy-tank-pershing/m26-heavy-tank-pershing-drawing-01.png">Source</a>)</span></span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><br />
<u><span lang="EN-US" style="font-size: 12pt; line-height: 115%; mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Value of the innovation – specifying the use of the tank</span></span></u><span lang="EN-US" style="mso-ansi-language: EN-US;"><br />
<span style="font-family: Calibri;">Nevertheless, the real great value of the tank was not captured until the second world war.<span style="mso-spacerun: yes;"> </span>It were the Germans who realized how to use the tank to capture its full value. After the first world war, they studied the use of the tanks in the first world war. The studied the advantages <u>and</u> the disadvantages</span><a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftn2" name="_ftnref2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-US" style="font-family: "Calibri", "sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">[2]</span></span></span></span></a><span style="font-family: Calibri;"> of the tank in order to create a better understanding of how a tank could be used in war. <br />
In short: They realized that the tanks were strong and fast, and could create a breakthrough in the defense lines of the enemy. But what next? Follow up actions were not specified in world war one… The problem was, that the infantry could not keep up with the high speed of the tank. Therefore the breakthrough could not be consolidated and<span style="mso-spacerun: yes;"> </span>terrain could not be captured.<span style="mso-spacerun: yes;"> </span>Besides that , the tanks were strong, but on specific terrain they <span style="mso-spacerun: yes;"> </span>are very <span style="mso-spacerun: yes;"> </span>vulnerable if they are not accompanied with infantry (especially on the terrain of urban warfare). The solution would be to make sure the infantry could keep up with the tanks, so the Germans developed trucks and armored troop carriers which could transport the infantry to make sure the infantry could keep up with the tanks. </span></span><br />
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</div><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;"><br />
</span></span><u><span lang="EN-US" style="font-size: 12pt; line-height: 115%; mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Change in processes – a new paradigm of warfare</span></span></u><span lang="EN-US" style="mso-ansi-language: EN-US;"><br />
<span style="font-family: Calibri;">Due to studying the first world war which they lost, the Germans looked for other ways of warfare, which may make them better and stronger. The searched for valuable lessons from their loss while the allies relied on their status quo instead. <i style="mso-bidi-font-style: normal;">Why should we [Allies] change or be critical to our type of warfare? We won the war! </i>There was no intention to be critical and learn…<br />
Their critical view made the Germans see also the value which the tank may fulfill (see the previous paragraph of <i style="mso-bidi-font-style: normal;">Value of the innovation</i>). The invention, and later the development of the tank (which was accelerated due to the reluctance of <span style="mso-spacerun: yes;"> </span>trench warfare and a threatening war, WWII) played a significant role in the change in warfare. The static warfare characterized by opposing trench-systems, shifted to a dynamic warfare characterized by surprise, speed and impact. Among other reasons, which are too complex to explain here and which deserve attention on their own, the innovation of the tank was one of the key-drivers of this <i style="mso-bidi-font-style: normal;">shift in paradigm</i>. <br />
The technologic change also caused changes in processes. The development of the tank was probably one of the sources for a change of paradigm in warfare. It became much more dynamic, and it became known as the<i style="mso-bidi-font-style: normal;"> blitzkrieg</i>. Roughly, the idea of the blitzkrieg was to focus on a specific point in the defense <span style="mso-spacerun: yes;"> </span>of the enemy with a combination of infantry, panzer (tanks), airpower and even parachutists (Von Clausewitz called the focus on a specific point: <i style="mso-bidi-font-style: normal;">schwerpunkt</i>). Speed, power (impact) and surprise were the ingredients of this new dynamic type of warfare.</span></span></div><span style="font-family: Calibri;"><br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-XWi57RE0V0Yai_MxmZIH-Z9NehlHxMu3DPjdBDUMHtYHNjwrNL7NM2P43KApZUkMLjCZddO-aa5BE6pUT4riggtY1wgIIn77rWCR3TcNYkdRKSLLZZU7EAwlLyc-rtuH4OOl0BKDRb8/s1600/clausewitz.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" ida="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-XWi57RE0V0Yai_MxmZIH-Z9NehlHxMu3DPjdBDUMHtYHNjwrNL7NM2P43KApZUkMLjCZddO-aa5BE6pUT4riggtY1wgIIn77rWCR3TcNYkdRKSLLZZU7EAwlLyc-rtuH4OOl0BKDRb8/s1600/clausewitz.jpg" /></a></div><div style="text-align: center;"><span style="font-size: x-small;">Carl von Clausewitz. Author of the book 'On War' (<a href="http://defense-and-freedom.blogspot.com/2010/01/schwerpunkt-and-center-of-gravity.html">Source</a>)</span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt; text-align: left;"><br />
<span style="font-family: Calibri;"><span lang="EN-US" style="font-size: 12pt; line-height: 115%; mso-ansi-language: EN-US;">Luckily the Allies pulled themselves together and won the war. It is very likely that this will be discussed in later articles.</span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt; text-align: left;"><span style="font-family: Calibri;"><u><span lang="EN-US" style="font-size: 12pt; line-height: 115%; mso-ansi-language: EN-US;">Lessons learned which may also be valuable for business</span></u><span lang="EN-US" style="mso-ansi-language: EN-US;"></span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">-</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Most of the time <b style="mso-bidi-font-weight: normal;">technological changes</b>, are not a success in itself.<b style="mso-bidi-font-weight: normal;"> Processes</b> ( in its broadest sense, varying from production processes to organizational & policy processes) may need to be changed to fully capture the value of a technological innovation.</span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">-</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Creating a <b style="mso-bidi-font-weight: normal;">breakthrough</b> with new inventions (products, services) is not enough, you have to have next steps organized (or at least in mind). Capturing market share is good, but make sure you have resources and plans how to <b style="mso-bidi-font-weight: normal;">consolidate</b> your market share. </span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">-</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">What is the <b style="mso-bidi-font-weight: normal;">usefulness of an innovation</b>? Although a new product is fantastic, if there is no market for it, be critical on the resources you spend on them. Spending resources on the development of tanks while you are in a naval warfare may not be the right way to utilize your resources at that moment. </span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">-</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Especially nowadays, it is <b style="mso-bidi-font-weight: normal;">dangerous to rely on your status quo</b>. You have to be aware of changes and innovation in you direct and indirect surroundings (market). Your necessity for innovation may not (seem) to be high, but for other organizations it may be and once they have changed, they may have set a new standard which outcompetes yours. Your status quo has been vanished. In this complex and ever changing world, the term <i style="mso-bidi-font-style: normal;">status quo</i> may not be applicable anymore and may be a fairytale or utopia. <br />
Anyway, the message is that it is dangerous to sit back and do nothing. Scan your market and (potential) competitors, even if you think they are not capable of doing anything (be aware of underdogs).</span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">-</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">War makes people inventive, because the <b style="mso-bidi-font-weight: normal;">necessity for change and innovation</b> is high. This causes a lot of new inventions (for example the tank, jet-fighter, just to name a few during the world wars) which make your standard useless. <br />
This may also be applicable to businesses. Highly competitive markets make players on that market <b style="mso-bidi-font-weight: normal;">creative</b>.</span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">-</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Every organization has <b style="mso-bidi-font-weight: normal;">limited resources</b>. Think carefully where you use them for. Sometimes it may be better to focus your resources on a specific area (<i style="mso-bidi-font-style: normal;">Schwerpunkt</i>) instead of trying to compete with all your (potential) competitors on all fronts, there are just not enough resources to this. In the second world war, the Germans had to fight on multiple fronts against multiple enemies, they (luckily for us) just didn’t have enough resources to act on both theaters. <br />
Translating <i style="mso-bidi-font-style: normal;">Schwerpunkt </i>to innovation in business, it is important to <b style="mso-bidi-font-weight: normal;">focus on a (or a few) specific innovation(s),</b> because innovating is very expensive (but necessary, there is no status quo). But make the choice for a certain innovation carefully, based on a <b style="mso-bidi-font-weight: normal;">plan</b> which includes the next steps to capture full value of your innovation and consolidate these. The plan should also include risk analysis (what if it doesn’t work out the way we thought it should). Draw up multiple scenario’s and make <span lang="EN-US" style="font-family: "Calibri", "sans-serif"; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">a choice based on theory and experience</span><b style="mso-bidi-font-weight: normal;"><span style="mso-spacerun: yes;"> </span></b>. <br />
Although focusing your resources on a specific point, bear in mind that this may also be very dangerous, <b style="mso-bidi-font-weight: normal;">spread your risks</b>. And make sure failure is compromised by other focus areas. Sometimes it may be better to have a few Schwerpunkts (focus areas). </span></span></div><div style="mso-element: footnote-list;"><br clear="all" /></div><span style="font-family: Calibri;"></span><br />
<div class="MsoFootnoteText" style="margin: 0cm 0cm 10pt; mso-element: footnote;"><a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri", "sans-serif"; font-size: 10pt; line-height: 115%; mso-ansi-language: NL; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">[1]</span></span></span></span></a><span style="mso-ansi-language: EN-US;"><span style="font-size: x-small;"><span style="font-family: Calibri;"> <span lang="EN-US">Even Leonardo da Vinci made drawings of a ‘tank’. The idea was to use the tank to create breakthroughs. It was not a fully substitute for manpower.</span></span></span></span></div><div class="separator" style="clear: both; mso-element: footnote; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtSxIBU-kZW2qjcA3_J0ep7oT2mbjaoRs7wdc200Gva_e7PvNI_RU3o1luTSgkA49z2zjBvJjE7hYCNUYCmmUHn9f4vjpEWlCWPvI1uC-xeem2O__8Y4uHqz3EGMP2baDqzvEnkqHzfng/s1600/da-vinci-invention-tank.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="119" ida="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtSxIBU-kZW2qjcA3_J0ep7oT2mbjaoRs7wdc200Gva_e7PvNI_RU3o1luTSgkA49z2zjBvJjE7hYCNUYCmmUHn9f4vjpEWlCWPvI1uC-xeem2O__8Y4uHqz3EGMP2baDqzvEnkqHzfng/s320/da-vinci-invention-tank.jpg" width="320" /></a></div><div class="MsoFootnoteText" style="margin: 0cm 0cm 10pt; mso-element: footnote; text-align: center;"><span style="mso-ansi-language: EN-US;"><span style="font-size: x-small;"><span style="font-family: Calibri;"><span lang="EN-US">Da Vince's drawings of his invention of the tank (<a href="http://www.leonardo-da-vinci-biography.com/da-vinci-invention-tank.html">Source</a>)</span></span></span></span></div><div class="MsoFootnoteText" style="margin: 0cm 0cm 10pt; mso-element: footnote; text-align: left;"><a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftnref2" name="_ftn2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span style="font-family: "Calibri", "sans-serif"; font-size: 10pt; line-height: 115%; mso-ansi-language: NL; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;">[2]</span></span></span></span></a><span style="mso-ansi-language: EN-US;"><span style="font-size: x-small;"><span style="font-family: Calibri;"> <span lang="EN-US">Knowing what you are not capable of, is a great strength</span></span></span></span></div><br />
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<div style="mso-element: footnote-list;"><hr align="left" size="1" width="33%" /></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3864016784290475025.post-25332926116006931722011-10-20T23:48:00.003+02:002011-10-30T20:29:12.537+01:00Strategic decision making - what can managers learn from war-strategists?<div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Several authors discuss the usefulness of strategy & tactics as it is applied in war, for using it in business. They talk about the similarities between the battlefield and business. To my opinion there are more differences than similarities between a real battlefield and business. Nevertheless, much can be learned from the approaches to strategy used in war.</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Especially nowadays the informative value of insights about strategic decision making in war for managers can be very high, because most markets are continuously and rapidly changing. Decisions have to be taken on short terms with limited information while the impact of the decisions are high and critical. Waiting for actions of competitors is not an option, you will lose the initiative and will be behind on your competitors. Losing initiative will in some markets lead to losing a battle, or even worse: lose the war. </span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">The highly competitive and rapidly changing environment looks to a certain extent like situations which we see in war. War strategists (officers) have to make decision under great time-pressure with limited information (of which the reliability can be questioned), while the impact is high.</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Let there be no misunderstanding; the impact of decisions in war are much higher as these are in business. No doubts here, as wartime decisions are decisions concerning the lives of human beings. Nevertheless, the way of thinking which officers have when making strategic decision, can be very useful for managers in business, because sometimes business can look like a battlefield. Approaching the business like a battlefield can be useful in these rapidly changing and highly competitive world.</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Some examples of authors which make the parallel between strategy in war and strategy in business are:</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Jan Jaap Brouwer – Schaduwen over de woestijn (Dutch book)</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Robert Ogilvie – Krijgen is een kunst (Dutch book)</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Sun-Tzu and Gary Gagliardi - The Art of War for the Management Warrior: Sun Tzu's Strategy for Managers</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">More will follow…</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Much of these books are based on books/studies of classic war-strategists (which are very interesting and inspiring) like:</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Machiavelli – the prince</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;"><a href="http://www.gutenberg.org/files/13549/13549-h/13549-h.htm">Henri de Jomini – The art of war</a></span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Carl von Clausewitz – On War</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">Sun Tzu – The art of war</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">But there are also many examples of (battles of) more recent wars (WW I, WWII, Vietnam).</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">The plan is to post in the near future some theory accompanied by examples (based on books or written by myself) about strategic topics in war related to strategic supply chain management, procurement and strategy in business. This serie of articles is called: <strong><u>The parallel between warfare and business</u></strong></span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">New posts will be announced on my twitter account:</span></div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><br />
</div><div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt; mso-outline-level: 2;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;"><a href="http://twitter.com/#!/klprocurement"><span style="color: blue;">Click here for my twitter page (KLProcurement) and follow me!</span></a></span><br />
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<strong><u>The parallel between warfare and business:</u></strong><br />
1) <a href="http://scmprocurement.blogspot.com/2011/10/innovation-parallel-between-warfare-and_30.html?spref=tw">The parallel between warfare and business</a> (<span style="color: magenta;"><strong>new</strong></span>)</div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-3864016784290475025.post-86006207125381402052011-06-08T23:15:00.001+02:002011-06-19T21:04:27.112+02:00Nothing new about ‘Total Value of Ownership’<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">When I saw a <a href="http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture_Compulsive_Contributors.PDF">report</a> of Accenture (2011) I got triggered to write this text. Why? Well Accenture says the right thing when they are stating that Total Cost of Ownership (TCO) models are well accepted these days. It continues to argue that these days, procurement is more and more focusing on Total Value of Ownership (TVO), nothing wrong with that, I couldn’t agree more! <span style="mso-spacerun: yes;"> </span><br />
What then, triggered me to write this post? Well not just Accenture, but many more organizations, experts, books, etcetera argue about the present focus on TVO, and many of them (not all), as if TVO is something new which they write or talk about for the first time. But it’s not something which just has appeared today, it’s an incremental trend (don’t take trend to literally) which has started years earlier, especially in countries like China and Japan. <br />
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Even in scientific articles, the Total Value of Ownership has been described before.</span></span><span style="font-family: Calibri;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"> <span style="mso-no-proof: yes;">Morssinkhof, Wouters & Warlop wrote in 2005 already about the Total Value of Ownership. They argue that </span>The TVO concept recognizes that the value of a higher priced offering may come from revenue improvements and not only, or not at all, come from total cost savings. They continue to argue that a firm may be able to offer a better end-product to its (end) customers (at the end of the chain) when working together with a particular supplier (and with that increase its revenues). <br />
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When going further back in time we see that, in 1989, Michael Porter also wrote about a concept which is quite similar, or has at least some overlapping parts (maybe at a somewhat a higher theoretical level. Indeed… Value Chain Analysis (VCA). Value Chain Analysis as proposed by Porter (1989) captures both the TCO and the TVO perspectives by focusing on costs and differentiation (value) at the same time. By having this combined focus, VCA strives for a competitive advantage which is expected to result in an increase in profitability.<br />
<br />
In the spring of 2010, I started writing my Master Thesis. I was writing about information exchange between buyers and suppliers, because I experienced the difficulties in sharing information between buyers and suppliers (both parties were hesitant to disclose information) while both parties realized that sharing information (in many cases) is profitable. I used several theoretical frameworks, but besides that<span style="mso-spacerun: yes;"> </span>I also had to describe ‘profitability’ with respect to buyer-supplier relationships. The idea of TVO attracted my attention, but at the same time I realized that cost (TCO) should be taken into account as these two (TVO and TCO) are <span style="mso-spacerun: yes;"> </span>inextricably linked with each other (see my thesis how cost (TCO) and revenue (TVO) interact with each other). <span style="mso-spacerun: yes;"> </span>In order to clarify <span style="mso-spacerun: yes;"> </span>profitability within a buyer supplier relationship, I combined the two perspectives and made one new perspective of it: </span><b style="mso-bidi-font-weight: normal;"><u><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri;">Total Inter-firm Profitability perspective</span></u></b><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri;">. The TIP-perspective looks at the <u>total cost</u> incurred and the <u>total value</u> created by a buyer and supplier for a specific product/service-transaction in that buyer-supplier relationship. It </span><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;">refers to the total profitability of a (part of the) supply chain instead of the profitability of one focal organisation. </span><span lang="EN-US" style="mso-ansi-language: EN-US;"></span></span><br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt; tab-stops: 12.0cm;"><span style="font-family: Calibri;"><span lang="EN-GB" style="mso-ansi-language: EN-GB; mso-bidi-font-family: Calibri;">To be clear, this post is not about what perspective is better, more useful, etcetera, because that is dependent on many other things (maybe something to write about later), but the goal was to show you that TVO is not as new as some people say it is. <span style="mso-spacerun: yes;"> </span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"></span></span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 10pt;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="font-family: Calibri;">Conclusion:</span></span></b><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><br />
<span style="font-family: Calibri;">Yes: Nowadays, TVO is very relevant in procurement (and probably will be coming years? Decennia?)<br />
No: TVO is nothing new</span></span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 10pt;"><br />
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</div>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-3864016784290475025.post-13103474177665433732011-05-17T15:19:00.005+02:002011-05-17T15:48:09.838+02:00Information overload - in- or outsource 'Intel 2.0'Interesting post of Steve Hall on the procurement blog about the <a href="http://blog.procurementleaders.com/procurement-blog/2011/5/10/guest-post-the-nature-of-buyer-supplier-relationships-is-cha.html"><span style="color: blue;">changing nature of buyer-supplier relationship</span></a><span style="color: blue;">.</span><br />
Some comments on a point he suggests: <br />
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<li><em><strong>Greater pricing transparency</strong>: eSourcing and procurement’s intrepid scrutiny into still-cloaked categories are bringing increasing price transparency. Global trading networks and online communities will take this up a notch, further decreasing the importance of price negotiations. “The Cloud,” predicts Roy Anderson, former CPO of Metlife, “will force price transparency. Savings will be tied to things like discounts and rebates for reaching certain volumes or paying early.”</em></li><br />
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Although he certainly has a good point here, I have some remarks:<br />
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1) this greater pricing transparency is highly dependent on good eProcurement software which is professionally implemented and used in a proper way by the organization. Furthermore this eProcurement software depends on the informaiton input, see point 2<br />
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2) Although the internet is providing more and more access to a lot of information (also on price information), it is creating its own pitfall: an overload of information (and what about the reliability of the information?). With this, a new market is created for organizations which deliver the service to deal with the complexity of this information overload. This market is growing with on the one hand the more general search engines which can be used to organize to a certain extent this information (although it's more gathering than organizing it), on the other hand there exist more specialized organizations/communities which focus on specific markets and industries. Nevertheless, I think this 'new' market is still growing, and will be growing along with the increase of the information overload. <br />
Of course it is not a completely <em>new </em>market because we all know google and similar search engines. Furthermore there are several (more specialized) marketing associations who act in this new market. Anyway due to the growing information overload the role of 'gatekeeper' for information will become increasingly important in the future. It may determine your competitive advantage as organizations and managers act based on the information. Therefore an important question for organizations with respect to the future will be: <strong><u>in- or outsource 'Intel 2.0'?</u></strong><br />
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Logically, this question adresses more than just procurement, and is a strategic question (of importance).<br />
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3) I think that, dependent on the market situation, the subject of negotiation remains to take a solid place in the S2C process (especially in conservative slow moving industries) when contracting new suppliers<br />
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Nevertheless, I suggest to read the article of Steve Hall as it is very interesting. Furthermore he also wrote a <a href="http://blog.procurementleaders.com/procurement-blog/2011/5/17/guest-post-the-nature-of-buyer-supplier-relationships-is-cha.html"><span style="color: blue;">part II</span>.</a>Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-3864016784290475025.post-50382058376925492312011-03-30T16:12:00.001+02:002011-04-07T10:53:50.661+02:00Compliance in the world of procurement<span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Hello All,<br />
<br />
I’m not sure whether there is one right answer, but I was curious to your definition/ breakdown of compliance with respect to procurement?<br />
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I was thinking about the following breakdown of compliance (in the world of procurement):</span></span> <br />
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<div class="MsoListParagraphCxSpFirst" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">1)</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Supplier compliance</span></span></div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">This is concerning whether there is bought from suppliers with which there are <u>frame agreements</u></span></span></div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">2)</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Contract compliance</span></span></div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">In this type of compliance it is about whether you purchase the <u>item</u> (product/service) for the agreed <u>price</u>.</span></span></div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">3)</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Process compliance</span></span></div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Whether the right process is followed. For example buying through the right channel and following the right steps (instead of for example maverick buying).</span></span></div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt; mso-add-space: auto;"><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US; mso-bidi-font-family: Calibri;"><span style="mso-list: Ignore;"><span style="font-family: Calibri;">4)</span><span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Policy compliance</span></span></div><div class="MsoListParagraphCxSpLast" style="margin: 0cm 0cm 10pt; mso-add-space: auto;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Is the person allowed to buy those products?</span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><br />
</div><div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">All your definitions, remarks and feedback is more than welcome, as I try to pinpoint a valid definition.<br style="mso-special-character: line-break;" /></span></span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="font-family: Calibri;">Thanks in advance!<br />
Kevin</span></span></div>Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-3864016784290475025.post-92005517634670328342011-03-28T15:28:00.004+02:002011-04-07T10:56:06.708+02:00Supply Chain CostsIn my <a href="http://scmprocurement.blogspot.com/2010/12/costs.html"><span style="color: orange;">article on costs</span></a><span style="color: orange;">,</span> I provided the following figure.<br />
<a name='more'></a><br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8x78rlYrRzDQeLE6rsbqkdnRRib5JknZBp7Xo8L2PEPAIca2pU828yIiphFAWXoi0F_qkpMlq-4kg-ScohVR0uv1UiOlSuyiS-Gp2PhrKGzeKq_ifwWG-lRTfpnvM_giOfehVPCN_bZw/s1600/Untitled1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="640" ox="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8x78rlYrRzDQeLE6rsbqkdnRRib5JknZBp7Xo8L2PEPAIca2pU828yIiphFAWXoi0F_qkpMlq-4kg-ScohVR0uv1UiOlSuyiS-Gp2PhrKGzeKq_ifwWG-lRTfpnvM_giOfehVPCN_bZw/s640/Untitled1.jpg" width="588" /></a> <br />
In essence it says the same as Jimmy Anklesaria does in his book 'Supply Chain Cost Management' (see figure below).<br />
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<br />
<br />
<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhq73RFf0T5VvaaOOxvZvCSqn40u_L0-SEvi72Sz5J1bmPFhdqQeIrJmklZTTSlE4RTroEnDRU2SzsNJD-iBrvLOPlH8eXt6DKQE3gwncRm5rI-GcS0BmNq7BXcak3chG7Lmm9_v1fBlHo/s1600/supply+chain+cost+flow.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="204" r6="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhq73RFf0T5VvaaOOxvZvCSqn40u_L0-SEvi72Sz5J1bmPFhdqQeIrJmklZTTSlE4RTroEnDRU2SzsNJD-iBrvLOPlH8eXt6DKQE3gwncRm5rI-GcS0BmNq7BXcak3chG7Lmm9_v1fBlHo/s320/supply+chain+cost+flow.png" width="320" /></a></div><strong><span style="font-size: xx-small;">Source: </span></strong><span style="font-family: inherit; font-size: small;"><strong><span style="font-size: xx-small;">Supply chain cost management: the AIM & DRIVE process for achieving extraordinary results. Author: Jimmy Anklesaria (2008)</span></strong> (<span style="color: orange;">Reading tip</span>)</span><br />
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<span style="font-family: inherit; font-size: small;">One difference is the composition of the costs categories:</span><br />
<br />
<span style="font-family: inherit; font-size: small;">Anklesaria (2008) uses Acquisition price, Conversion, GSA and Profit, while I use: COGS (consisting of direct material, direct labour and manufacturing overhead), GSA and Profit. </span><br />
<br />
Despite this difference in composition/layout, the essence of the figure remains the same. <span style="font-family: inherit; font-size: small;"><br />
</span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3864016784290475025.post-34497940131428788412011-03-28T14:57:00.001+02:002011-04-07T10:57:39.436+02:00Value and Costs<div><span style="color: black;"><strong>Despite the upcoming trend of 'value', costs remain important!!</strong></span><br />
<br />
<span style="color: black;">The concept 'value' continues to take a central position in procurement. With respect to the position of Procurement I consider this as a positive trend and it contributes to the fact that in many organizations procurement is shifting from a support to a strategic function. There is a lot to gain for procurement with respect to value, nevertheless, 'value' is linked to 'costs'; it are two sides of the same coin. Therefore an article is expected concerning a more holistic view of procurement in which costs and value are not seen as two separate concepts, but two intertwined concepts. </span><br />
<a name='more'></a><br />
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Reading tip is the classic work of Porter: Competiteve Advantage. Although it is a somewhat older book, the theory about costs and value in order to obtain competitive advantage provide also these days useful insights!</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3864016784290475025.post-25159842005364590002011-03-28T10:59:00.001+02:002011-04-07T10:58:18.089+02:00Industry data sourcesSome months ago, I posted an article about should cost modeling based on industry averages. There are multiple ways to extraxt industry data. A lot of them are to a certain extent available on the internet, some are free, some need registration and other need a paid membership.<br />
<br />
I will post some of them here, <br />
<a name='more'></a>don't hesitate to add data sources.<br />
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<a href="http://www.census.gov/eos/www/naics/"><span style="color: #741b47;">NAICS</span></a><span style="color: #741b47;"> </span><span style="color: black;">(used in the example)</span><br />
<span style="color: #741b47;"><br />
</span><br />
<a href="https://www.anklesaria.net/CostModeler/CostModelerLight/"><span style="color: #741b47;">Ankklesaria cost modeler</span></a><span style="color: #741b47;"> </span><span style="color: black;">(tip!)</span><br />
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<a href="http://www.capsresearch.org/"><span style="color: #741b47;">Caps Research</span></a><br />
<span style="color: #741b47;"><br />
</span><br />
<a href="http://members.statsinsight.com/login.php"><span style="color: #741b47;">Statsinsight</span></a><br />
<span style="color: #741b47;"><br />
</span><br />
<a href="http://www.unspsc.org/Membership_Benefits.asp"><span style="color: #741b47;">United Nations Standard Products and Services Code</span></a><br />
<span style="color: #741b47;"><br />
</span><br />
<a href="http://www.cbs.nl/nl-NL/menu/home/default.htm"><span style="color: #741b47;">Centraal Bureau voor de Statistiek</span></a><span style="color: #741b47;"> </span><span style="color: black;">(Dutch)</span><br />
<br />
<span style="font-family: Garamond; font-size: small;"><span style="font-family: Garamond; font-size: small;"><span style="color: #741b47; font-family: Times, "Times New Roman", serif;"><a href="http://www.osha.gov/pls/imis/sic_manual.html">Standard Industrial Classification Manual</a></span></span></span><br />
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<a href="http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/"><span style="color: #741b47;">Eurostat</span></a><br />
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<a href="http://www.peerscape.com/"><span style="color: #741b47;">Peerscape</span></a><br />
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<a href="http://www.ic.gc.ca/eic/site/cis-sic.nsf/eng/home"><span style="color: #741b47;">Canadian Industry Statistics</span></a><br />
<span style="color: #741b47;"><br />
</span><br />
<u><strong><span style="color: black;">Specific industries</span></strong></u><br />
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<a href="http://www.lme.com/home.asp"><span style="color: #741b47;">London metal exchange</span></a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3864016784290475025.post-89815571969661878362011-02-23T15:08:00.002+01:002011-04-08T15:41:05.773+02:00Interesting article on should cost modelling by Jonathan O'BrienInteresting article on should-cost modelling written by Jonathan O'Brien:<br />
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<a href="http://www.procurementleaders.com/news/latestarticles/should-cost-modelling/">http://www.procurementleaders.com/news/latestarticles/should-cost-modelling/</a><br />
<br />
His emphasize on the power balance and the market situation is vert important! Although a very interesting piece of thought leadership, the aim is solely focused on adversarial relationships with suppliers, meanwhile fully ignoring the cooperative way in should cost modelling. <br />
<a name='more'></a>In a cooperative way, buyers can get access to the factory and obtain all necessary information. Of course suppliers will in first instance be hesitant to disclose this information and some they will continue always to be hesitant. But he speaks about overcoming culture barriers, which, I believe, is also relevant for exchanging these types of sensitive information. Although very difficult, it is possible when taking certain determinants for a good information exchange into account (for more information on this topic see my Master Thesis, 2010: The <a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=vertical"><span style="color: black;">vertical</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=information"><span style="color: black;">information</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=exchange"><span style="color: black;">exchange</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=process"><span style="color: black;">process</span></a><span style="color: black;"> : A </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=multiple"><span style="color: black;">multiple</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=case"><span style="color: black;">case</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=study"><span style="color: black;">study</span></a><span style="color: black;"> to the </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=determinants"><span style="color: black;">determinants</span></a><span style="color: black;"> of the '</span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=Total"><span style="color: black;">Total</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=Inter-firm"><span style="color: black;">Inter-firm</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=Profitability'-information"><span style="color: black;">Profitability'-information</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=exchange"><span style="color: black;">exchange</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=process"><span style="color: black;">process</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=between"><span style="color: black;">between</span></a><span style="color: black;"> </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=buyers"><span style="color: black;">buyers</span></a><span style="color: black;"> and </span><a href="http://cat.ubn.ru.nl/DB=4/SET=1/TTL=1/CLK?IKT=4&TRM=suppliers"><span style="color: black;">suppliers</span></a>Unknownnoreply@blogger.com5tag:blogger.com,1999:blog-3864016784290475025.post-6649992423736989282011-01-18T11:59:00.001+01:002011-04-08T15:42:27.086+02:00Interview on should cost modelling<div class="separator" style="clear: both; text-align: left;">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?</div><div class="separator" style="clear: both; text-align: left;">Well, in this post you'll find this interesting interview about should cost modelling. it is an<a href="http://www.nextlevelpurchasing.com/supply-management-podcast.php"> <strong><span style="color: blue;">interview</span></strong></a> with Tim Reis (Sourcing Manager).</div><div class="separator" style="clear: both; text-align: center;"><br />
</div><div class="separator" style="clear: both; text-align: left;">Some points I want to highlight of this interview are:</div><a name='more'></a><div class="separator" style="clear: both; text-align: left;">- 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).</div><div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">- 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:</div><div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">- Sharing the ownership of the model</div><div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">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</div><div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">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.</div><div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">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. </div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3864016784290475025.post-32744614334294237932011-01-17T13:17:00.001+01:002011-04-08T15:43:01.763+02:00How to use the should cost price?<div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-size: 14pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 12.0pt;">(ppt summary of this article will follow soon)</span></b><br />
<br />
<b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-size: 14pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 12.0pt;">How to use the outcome of a should cost model (the should cost price)</span></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">Although I only discussed the should cost model method based on industrial averages, I thought it might be interesting to write a piece about what one can do when you have calculated the should cost price of a product. <br />
<br />
So, once you have the should cost price, what next? How are you </span><span lang="EN-US" style="mso-ansi-language: EN-US;">going to use the should cost price? What is the best method to use a should cost price?</span><br />
<a name='more'></a></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;">There is actually not one best way. It is dependent on many (contextual) factors, though some main techniques are discussed here. But let these methods/techniques not be a constraint in using a should cost price, be creative and develop your own method, because there is not one best practice in this case. Especially not because should cost models are still in the exploring phase and not yet widely used. Consider yourself as a ‘should cost model pioneer’.</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">The main distinction made in the use of the should cost price, is whether it is used in a pure adversarial buyer-supplier relationship (one of distance in which a buyer and supplier conducting transactions on the ‘market’) on the one hand or in a close alliance between the buyer and the supplier on the other hand. Of course this is not as neat divided as stated above; consider it as a continuum on which the market and the hierarchy are the two extremes (see figure 1). An adversarial relationship is closest to the market and the collaborative relationship approaches the hierarchy. </span></div><br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEqNSmg2KJ_FuTeDqF9E4a4hfXmDkrgCATafawaEWAm0cQ-9sSh75n5m6ptvJEKN5l80_8Qvm-dJHkcsnE4uHf5tOGGT65ir9iMAueX_Q26MrBf6KgK2SSYHTj3siJLczihE13OTgD164/s1600/Untitled.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="120" n4="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEqNSmg2KJ_FuTeDqF9E4a4hfXmDkrgCATafawaEWAm0cQ-9sSh75n5m6ptvJEKN5l80_8Qvm-dJHkcsnE4uHf5tOGGT65ir9iMAueX_Q26MrBf6KgK2SSYHTj3siJLczihE13OTgD164/s320/Untitled.jpg" width="320" /></a></div><br />
<div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b><span lang="EN-GB" style="font-size: 10pt; line-height: 150%; mso-bidi-font-size: 12.0pt;">Figure 1 Relationship continuum<span style="mso-spacerun: yes;"> </span></span></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">On the left, you can see the buyer-supplier ‘relationship’ as one of distance, the should cost price can be used as a negotiation technique between the buyer and the supplier. On the right extreme a buyer-supplier relationship is depicted in terms of a hierarchy. This last means that the supplier is actually part of the organization, you have internalized the production of the product; in other words the production of the product is executed within the boundaries of your organization. In between these extremes you will find many other forms of relationships between buyers and suppliers. The more the kind of relationship is located to the left extreme, the more the alliance is one of distance (e.g. a formal agreement for one year to buy a certain amount of non-strategic products with no options for future deals already defined). Conversely, the more the more the relationship is located to the right extreme of the continuum, the more you speak of a closer relationship between the buyer and the supplier (e.g. joint venture). </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">In this last case it is more logical to use the should cost model as a method for searching together for cost reductions in order to strengthen the competitive position of the buyer-supplier dyad. In case a relationship is more located to the left side of the continuum, an adversarial relationship (relationships of distance), the use of should cost models is more restricted to that of a negotiation tool. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">But bear in mind that you’re still a SCM-pioneer which means that the use of a should cost model is not restricted to the options displayed in this model. Choosing for one of the two methods above, does not imply that the other method is excluded. Combinations of, or changing of method during the process is possible of course. Especially when the relationship between the buyer and supplier is located somewhere in the middle of the continuum in figure 1. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-GB">1 Negotiation tool</span></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">The negotiation techniques discussed in this manual, are techniques with respect to the should cost model. This implies that besides these techniques, a lot of other negotiation techniques and strategies exist. It should be clear that it is not the goal of this article to discuss all existing negotiation techniques, just bear in mind that the negotiation techniques discussed below are not exhaustive. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">First of all the should cost method can be used for opening up the discussion with your supplier concerning the product price. Using a should cost model in a negotiation provide some grips in the discussion where you can fall back on. Based on one of the three (or a combination of) should cost model methods, you have a (rough) idea about what the costs are (or better: should be) which settle a certain price level. This in contrast in case you approach your supplier without any pre-knowledge of the costs and accepting the price composition as a kind of black-box.</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">In case you know the percentages of the cost elements, whether it is based on industry averages or an annual report, you can confront the supplier with those figures. A great chance that the percentages are not exactly right. No problem; let the supplier explain why those figures are not right and why according to theme their costs and the corresponding price is right. In case the supplier has nothing to hide the supplier will be open for discussion (to a certain extent). This will provide valuable information of your supplier to you.</span><span lang="EN-US" style="mso-ansi-language: EN-US;"></span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b><span lang="EN-GB" style="mso-bidi-font-style: italic;">1.1 Bottom up strategy</span></b><span lang="EN-US" style="mso-ansi-language: EN-US;"></span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Two main approaches of using a should cost model as negotiation tool can be distinguished: The bottom-up approach and the top-down approach. First the bottom-up approached is explained, the top-down approach will be discussed in the next paragraph. The bottom-up approach holds that you know the percentages of the costs-elements (based on one or more of the should cost methods) and at least one of the corresponding absolute figures. Take the cost element of which you know the corresponding absolute figure<a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">[1]</span></span></span></span></a> as a start (the ‘bottom’) and add, percentage-wise, the costs of the other cost- categories. This will result in the should cost price (the ‘up’). See figure 2 for a schematic depiction of the bottom-up approach. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOwSycIThx5UOe5FhVJGek5-AHsNmZ8Ue_W2b6pNMLgsYr9B6yrqIPSMBFIDDPL2nGspQeUdwl7H1GT0lDuH-cZtNbo3aHBSsbIB-vRR0yCp88ghvpFj6F4KmxGI8AqYI7PS_qqpAZIhY/s1600/Untitled2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="291" n4="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOwSycIThx5UOe5FhVJGek5-AHsNmZ8Ue_W2b6pNMLgsYr9B6yrqIPSMBFIDDPL2nGspQeUdwl7H1GT0lDuH-cZtNbo3aHBSsbIB-vRR0yCp88ghvpFj6F4KmxGI8AqYI7PS_qqpAZIhY/s400/Untitled2.jpg" width="400" /></a></div><br />
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</div></div><span lang="EN-US" style="mso-ansi-language: EN-US;"></span><br />
<div style="mso-element: footnote-list;"><br />
<hr align="left" size="1" width="33%" /><div id="ftn1" style="mso-element: footnote;"><div class="MsoFootnoteText" style="margin: 0cm 0cm 0pt;"><a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span lang="EN-GB"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-GB" style="font-family: "Times New Roman", "serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">[1]</span></span></span></span></span></a><span style="font-size: x-small;"><span lang="EN-GB"> </span><span lang="EN-US" style="mso-ansi-language: EN-US;">if for more than one cost element the percentages <i style="mso-bidi-font-style: normal;">and</i> the absolute figure are known, take the most accurate and reliable cost element. Normally this would be the ‘direct material cost element’ because the absolute figures of this element are relatively the easiest to calculate. </span></span></div></div></div><br />
<div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"><b><span lang="EN-US" style="font-size: 10pt; line-height: 150%; mso-ansi-language: EN-US;">Figure 2 Bottom-up strategy</span></b></div></div><div class="MsoNormal" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Of course if you have the percentage<i style="mso-bidi-font-style: normal;"> and</i> the absolute figure of one of the cost element, you are able to calculate the should cost price instantly. If for example the direct material cost element is 50% of the total costs, and the accompanied actual absolute figure of €500. This will result in a total should cost price of €1000, because:</span></div></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div align="center" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"><table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-bottom: medium none; border-collapse: collapse; border-left: medium none; border-right: medium none; border-top: medium none; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0cm 5.4pt 0cm 5.4pt; mso-yfti-tbllook: 480;"><tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0;"><td style="background-color: transparent; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; mso-border-alt: solid windowtext .5pt; padding-bottom: 0cm; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0cm;" valign="top"><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">€ 500</span></div></td><td style="background-color: transparent; border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding-bottom: 0cm; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0cm;" valign="top"><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"><span lang="EN-GB">50 %</span></div></div></td></tr>
<tr style="mso-yfti-irow: 1; mso-yfti-lastrow: yes;"><td style="background-color: transparent; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: #f0f0f0; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding-bottom: 0cm; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0cm;" valign="top"><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">€ X</span></div></td><td style="background-color: transparent; border-bottom: windowtext 1pt solid; border-left: #f0f0f0; border-right: windowtext 1pt solid; border-top: #f0f0f0; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding-bottom: 0cm; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0cm;" valign="top"><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">100 %</span></div></td></tr>
</tbody></table></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"><span lang="EN-US" style="mso-ansi-language: EN-US;">‘€ X’ represents the total price (100%) of the product in euro’s and can be calculated as follows:</span></div></div><div class="MsoNormal" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg5aTL92Odj8s_u8fgpvsQB7aP7mdzHW8qJh95pLbHtEPRgNxIdZPvCLVlTPMAH3MYLOv64qD5JESmev0oYFBgmu0n4BP22il-xvyMIyKn3S75jE4PA8VL4vYMQ-B2YirEmJ9rro4kQ6fc/s1600/Untitled3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" n4="true" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg5aTL92Odj8s_u8fgpvsQB7aP7mdzHW8qJh95pLbHtEPRgNxIdZPvCLVlTPMAH3MYLOv64qD5JESmev0oYFBgmu0n4BP22il-xvyMIyKn3S75jE4PA8VL4vYMQ-B2YirEmJ9rro4kQ6fc/s1600/Untitled3.jpg" /></a></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"><br />
</div></div><div class="MsoNormal" style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none;"><span lang="EN-US" style="mso-ansi-language: EN-US;">On the other hand you have the top-down approach which act the other way around, this one will be discussed in the next paragraph.</span></div></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b><span lang="EN-GB" style="mso-bidi-font-style: italic;">1.2 Top down strategy</span></b><span lang="EN-US" style="mso-ansi-language: EN-US;"></span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;">T</span><span lang="EN-GB">his method is actually pretty much the same as the bottom-up method, but instead of constructing the should cost price by summing up the costs (based on one or more of the methods before) this top down method takes the price level provided by the supplier as the starting point.</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">Besides the different starting point, this method also differs from the bottom-up method because it provides the opportunity to focus on one specific cost-category of interest. This does not mean that you cannot discuss all cost-categories, but you aim for one cost-category at the time or just the cost-categories in which you are interested. Compared </span><span lang="EN-US" style="mso-ansi-language: EN-US;">to the bottom-up approach t</span><span lang="EN-GB">he </span><span lang="EN-US" style="mso-ansi-language: EN-US;">top-down approach is acting conversely. </span><b><span lang="EN-US" style="font-size: 10pt; line-height: 150%; mso-ansi-language: EN-US;"></span></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;">With the top-down method you actually say to your (potential) supplier, ‘well okay, let’s assume you are right on your price level, let’s take a walk through the percentages and the absolute figures’. For example: the price level of the product set by the supplier is €1000 and the percentage of direct material cost is 50%<a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">[1]</span></span></span></span></a>. This means that according to you<span style="mso-spacerun: yes;"> </span>€500 is spend on direct materials. If more exact calculations point out that the direct material costs are only €400, than there is a gap of €100 in the direct material cost (10% of the total price). It is now the supplier’s tasks to clarify this gap. The first reaction would be that your calculations were not right. In that case, let your supplier explain why. Why are those calculations not right? Show me your calculation. Maybe your calculation are somewhat exaggerated, but a gap of 10% is rather big, so maybe it is 5%, but it is still a large gap. Let them explain!</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Of course it could also be that, whatever the reason is, the supplier is right on its costs calculation. It is than your choice what to do.</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="mso-spacerun: yes;"> </span>If the actual figures do not match the figures based on the percentages, several cause can exist: </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="mso-list: Ignore;">-<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;">your calculated/assumed percentages were not right</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;"><span style="mso-list: Ignore;">-<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;">Price level of the supplier is too low/high: why:</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 72pt; mso-list: l0 level2 lfo1; tab-stops: list 72.0pt; text-indent: -18pt;"><span lang="EN-US" style="font-family: "Courier New"; mso-ansi-language: EN-US; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;">More/less profit for supplier</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 72pt; mso-list: l0 level2 lfo1; tab-stops: list 72.0pt; text-indent: -18pt;"><span lang="EN-US" style="font-family: "Courier New"; mso-ansi-language: EN-US; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;">Inefficient processes in internal value chain of supplier (process improvements or cost reductions possible?)</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 72pt; mso-list: l0 level2 lfo1; tab-stops: list 72.0pt; text-indent: -18pt;"><span lang="EN-US" style="font-family: "Courier New"; mso-ansi-language: EN-US; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;">The price of the purchased materials is too high (look at the next link in the chain)</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 72pt; mso-list: l0 level2 lfo1; tab-stops: list 72.0pt; text-indent: -18pt;"><span lang="EN-US" style="font-family: "Courier New"; mso-ansi-language: EN-US; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;">Customized production</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 72pt; mso-list: l0 level2 lfo1; tab-stops: list 72.0pt; text-indent: -18pt;"><span lang="EN-US" style="font-family: "Courier New"; mso-ansi-language: EN-US; mso-fareast-font-family: "Courier New";"><span style="mso-list: Ignore;">o<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-US" style="mso-ansi-language: EN-US;">Other causes</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;">In this way you can discuss all other cost elements. But it can be difficult to find out which reasons are the cause, because suppliers can be hesitant with the disclosure of information.</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="mso-ansi-language: EN-US;">Several options are available if you want certain (sensitive) information of your supplier. One is to co-operate and show them what is (financially) in for them. Maybe not directly in relation to your company but with respect to other customers. But it can also be that you as an buying organization are the more powerful organization and you will be able to force your supplier to disclose information<span style="mso-spacerun: yes;"> </span>In case of the first reason (financial revenues) they probably want some specification on paper (contracts concerning input of resources and how to divide the profits/costs, NDA’s etcetera) as they put themselves in a vulnerable position with respect to the customer because they disclose sensitive information.<br />
<br />
An advantage of the top down strategy, is that this method is based on the supplier’s own quotation, which therefore can be no point of discussion.</span><b><span lang="EN-GB" style="mso-bidi-font-style: italic;">1.3 The should cost price is much lower</span></b><i style="mso-bidi-font-style: normal;"><span lang="EN-GB"> </span></i><span lang="EN-US" style="mso-ansi-language: EN-US;"></span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">The should cost method can also be used as a very ‘aggressive’ negotiating method in which you go to the supplier and say: ‘the should cost price is X% below your price. This should cost price is for example based on industry averages or directly benchmarked to other suppliers and compared with these averages or suppliers you are too high. ‘I don’t mind how you are going to reduce your price, but manage it, otherwise we’ll go to an other supplier’. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">This is of course only possible when:</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18pt;"><span lang="EN-GB"><span style="mso-list: Ignore;">-<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-GB">there are other suppliers</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 36pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18pt;"><span lang="EN-GB"><span style="mso-list: Ignore;">-<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-GB">you have the bargaining power to act this way (partly dependent on the existence of other suppliers). </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">Be aware that in case bargaining power shift from your organization to your supplier due to what kind of reason (e.g. context changes, market situation changes), the chance exist that they will retaliate in the future for example by bypassing your organization and doing business with your competitor(s). </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="mso-ansi-language: EN-US;">2 Cooperation</span></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">In this method you will look together with you supplier to the costs of the supplier. This can be done by filling in together a should cost model and search on this way for potential cost reductions. It can also be that the purchasing organization takes the initiative and show where the supplier is too high in their costs (by using for example the bottom-up approach or the top-down approach) and provide them advice on how to improve their processes (to reduce costs or increase value). Of course there are a lot of other methods, but the main point here is that you use the should cost model not solely to bargain as two opposing parties but that you cooperate with your supplier. The goal is that this alliance will result in a win-win outcome (which is probably only feasible by combining the power of the supplier and the purchasing organization; synergy). In such alliances it can be of importance to develop your supplier by supporting the supplier on several aspects. There exists a huge amount of relevant and recent (scientific) literature on the subject of cooperation. Therefore it is not necessary to outline it here.</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="mso-ansi-language: EN-US;">3 Combination of negotiation and cooperation</span></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">Above the distinction has been made between ‘negotiation’ and ‘cooperation’ as ways of using the should cost model. This is not as black and white as it is depicted, because it is also possible to have a combination of the two models, on a complementary way, or in a sequential way. Though the methods as discussed above remain the same in case of complementarity and sequence, therefore a brief discussion of complementarity and sequence will do here. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b><span lang="EN-GB">3.1 Complementary </span></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">Here both ways are applied at the same time. So it could for example be that the purchasing organization and the supplier are cooperating by together filling in and applying the top-down method and discussing it. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">It could even go a step further, in order to reduce cost for the supplier and with that for the purchasing organization, they could decide look a tier further up the chain in which the purchasing organization is assisting the supplier to apply a should cost model on their supplier. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><b><span lang="EN-GB">3.2 Sequential</span></b></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">In case of sequence, the purchasing organization has prior intentions to use the should cost model as a practical tool in a negotiation with its supplier or as a tool in an alliance. But as the process develops, the purchasing organization can decide to shift the use of the tool from one way of using to the other manner of using it. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">In case of prior use as a negotiation model, the supplier's response on the should cost method can be that positive, that it also wants to use it and participate together with the buying organization in the process. The supplier may recognize the benefits for itself and decides to work together with the purchasing organization, in order to map its costs and tries to find cost reduction in favour of both organizations. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">But it can also be other way around. The purchasing organization is starting with the intention of using the should cost model in cooperation, but along the way it seems that the supplier is not showing any willingness to cooperate and/or disclose any information. Then it can be more wise to shift the use of the should cost model towards a strategy of negotiation. Of course it all depends on the context. </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">The method of using a should cost model described above are of course not the only methods. The question ‘which of the methods is the best?’ does not make any sense as it is dependent on many factors. Furthermore the methods provide just some grips, or in the best case a prior framework with a certain intention, to reach your target(s) and are in practice not that clear outlined. It requires your own creativity, because although the model may be very practical and rather simple, the usage of it may be rather complex due to (among other) several factors:</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 90pt; mso-list: l1 level2 lfo2; tab-stops: list 90.0pt; text-indent: -18pt;"><span lang="EN-GB"><span style="mso-list: Ignore;">1)<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-GB">targets/intention (of both the buying and supplying organization) </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 90pt; mso-list: l1 level2 lfo2; tab-stops: list 90.0pt; text-indent: -18pt;"><span lang="EN-GB"><span style="mso-list: Ignore;">2)<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-GB">context (e.g. bargaining power, economic situation, technological innovations etcetera<a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftn2" name="_ftnref2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-GB" style="font-family: "Times New Roman", "serif"; font-size: 12pt; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">[2]</span></span></span></span></a>). </span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt 90pt; mso-list: l1 level2 lfo2; tab-stops: list 90.0pt; text-indent: -18pt;"><span lang="EN-GB"><span style="mso-list: Ignore;">3)<span style="font-family: "Times New Roman";"> </span></span></span><span lang="EN-GB">interaction over time</span></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><span lang="EN-GB">The choice how you are going to use a should cost model depends on what your intentions are with the model (targets). Furthermore it depends on the context you are in; do you have bargaining power with respect to the supplier for example? All this is also dependent on the factor ‘time’. The interactions over time of contextual aspects, organizations and their targets, economical situation etcetera may cause changes which requires alterations in the way of using the should cost model. So once again, this shows that there is not one best practice of using the should cost method. Using should cost models demands logical thinking, creativity, initiative and improvisation. </span></div><div style="mso-element: footnote-list;"><br />
<hr align="left" size="1" width="33%" /><div id="ftn1" style="mso-element: footnote;"><div class="MsoFootnoteText" style="margin: 0cm 0cm 0pt;"><a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span lang="EN-GB"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-GB" style="font-family: "Times New Roman", "serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">[1]</span></span></span></span></span></a><span lang="EN-GB"><span style="font-size: x-small;"> The percentages can be based on the several methods described earlier: industry averages, annual report, information of the supplier self, value chain analysis. </span></span></div></div><div id="ftn2" style="mso-element: footnote;"><div class="MsoFootnoteText" style="margin: 0cm 0cm 0pt;"><a href="http://www.blogger.com/post-create.g?blogID=3864016784290475025#_ftnref2" name="_ftn2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span lang="EN-GB"><span style="mso-special-character: footnote;"><span class="MsoFootnoteReference"><span lang="EN-GB" style="font-family: "Times New Roman", "serif"; font-size: 10pt; mso-ansi-language: EN-GB; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-GB;">[2]</span></span></span></span></span></a><span lang="EN-GB"><span style="font-size: x-small;"> The context is very broad, it is actually everything outside the boundaries of the purchasing organization. </span></span></div></div></div><div class="MsoNormal" style="line-height: 150%; margin: 0cm 0cm 0pt;"><br />
</div>Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-3864016784290475025.post-79892685062513909572011-01-13T15:10:00.001+01:002011-04-08T15:43:26.716+02:00Expected: How to use the outcome of a should cost model<div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span lang="EN-US" style="font-family: "Times New Roman", "serif"; font-size: 12pt; line-height: 115%; mso-ansi-language: EN-US; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: NL;">On this blog, I will mainly write about should cost modeling, the concept is now introduced and I gave until now just one method how to perform a should cost model (by using industry averages). Other ways (including examples) will follow soon, but it is also important to know what you can do with a should cost price. Therefore my next post will be about ‘how to use the outcome of a should cost model’. </span></div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3864016784290475025.post-48951155545313175892011-01-13T15:03:00.000+01:002011-01-17T09:31:40.554+01:00Innovation Driven Procurement<div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 0pt;"><span lang="EN-US" style="font-family: 'Times New Roman','serif'; font-size: 12pt; mso-ansi-language: EN-US; mso-fareast-font-family: 'Times New Roman'; mso-fareast-language: NL;">As procurement is still often seen as a supporting function it is mainly only involved after a product is already developed which leaves the procurement with a limited supplier base in which they only can negotiate. The value that procurement may deliver is then fully neglected by the business. Involving procurement earlier in the process, or even in the development phase of the product, unties procurement and will give procurement the opportunity to add value. This is also called innovation driven procurement.<a href="http://innovationdrivenprocurement.blogspot.com/"> On this blog: you will find more about this new interesting concept.</a></span></div>Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-3864016784290475025.post-48650937875025774872011-01-13T14:49:00.001+01:002011-04-08T15:43:50.464+02:00As reaction on a <a href="http://blog.sourcinginnovation.com/2011/01/13/a-should-cost-model-is-great-for-negotiations.aspx">post about should cost modeling</a>, I wrote the following:<br />
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<span lang="EN-US" style="font-family: "Calibri", "sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">I think ‘the doctor’ got a good point here, that you not only should use the should cost model for negotiating better deals, but also really dive into the cost and look for the most expensive cost components. Or as I stated it on my blog about should cost models: <i style="mso-bidi-font-style: normal;">aim for the low hanging fruit first.</i> Which means that you look to the most expensive cost components, making the assumption that it is at these components where the most euro’s (or any other currency) are and so the most amount of money can be reduced here. But you also need to take into account how much effort is required to realize those reductions. The tradeoff must be made whether the reduction itself outweighs the costs to realize the reduction.<br />
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Parallel to or in extension of what ‘the doctor’ said, I think the should cost model should even be taken a step further; in cases in which it is possible (!) use it for <u>cooperation </u>with your supplier and not just for negations. Take your supplier relationship a step further.</span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3864016784290475025.post-21685741149975577272011-01-04T15:41:00.001+01:002011-01-04T15:41:54.547+01:00Should Cost Modeling. Method based on Industry AveragesCheck out this SlideShare Presentation: <div style="width:425px" id="__ss_6445265"><strong style="display:block;margin:12px 0 4px"><a href="http://www.slideshare.net/KevinLemmens/should-cost-modeling-method-based-on-industry-averages" title="Should Cost Modeling. Method based on Industry Averages">Should Cost Modeling. Method based on Industry Averages</a></strong><object id="__sse6445265" width="425" height="355"><param name="movie" value="http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=readonlyshouldcostmodeling-12941450815094-phpapp01&stripped_title=should-cost-modeling-method-based-on-industry-averages&userName=KevinLemmens" /><param name="allowFullScreen" value="true"/><param name="allowScriptAccess" value="always"/><embed name="__sse6445265" src="http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=readonlyshouldcostmodeling-12941450815094-phpapp01&stripped_title=should-cost-modeling-method-based-on-industry-averages&userName=KevinLemmens" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="355"></embed></object><div style="padding:5px 0 12px">View more <a href="http://www.slideshare.net/">presentations</a> from <a href="http://www.slideshare.net/KevinLemmens">KevinLemmens</a>.</div></div>Unknownnoreply@blogger.com0