If you read our last article Life cycle costing and its four major benefits, you will understand that why choosing a supplier because they are the cheapest can often cost you more. In this article, we will take a deep dive into the various types of costs associated in life cycle costing. This will ensure that you take account of all costs when you are making a purchase decision.
For most of us, the purchasing process is relatively simple: find the cheapest product/service, make the purchase and then move on to the next task. However, this is a risky tactic. Too frequently the simple, short-term approach of only considering the price results in a purchase that ends up costing much more than expected, especially if the item fails prematurely, turns out to be less efficient than expected, or requires more time to install or maintain than anticipated. Though many buyers are using life cycle costing as a decision-making tool, its use is still far from widespread. Nor are many buyers using life cycle costing to inform important decisions − this needs to change.
Establishing a good project procurement plan is critical to improve the efficiency and minimize the risks of procurement of goods and services from suppliers external to any project. The performance of the project is largely depending on the performance of these suppliers, and it defines the quality standards for the project.
As it is more and more difficult for forwarding and shipping companies to plan their warehouse and fleet capacities due to the growing volatility resulting from increasing globalization, procurement logistics is becoming increasingly important, especially from the perspective of costs reduction. If you are a logistic manager who want to achieve cost stability or even cost reductions, below are the 5 key tips to make sure that you get your procurement logistics right from the beginning.
Local content has now become a very hot topic in procurement departments. Most countries have made, or are making, local sourcing mandatory for companies in specified industries. But, what is local content? And why has it become such a hot issue?
When a company needs to tighten up the way it already purchases something significant or purchase something new, it usually considers multiple suppliers. It evaluates everything – best price, expected reliability, and so on.
This can be quite a lengthy process if there are a lot of potential suppliers, but, because it's the only reliable way to optimise pricing and delivery, it's a smart use of resources.
The problem comes when organisations carry out supplier evaluations only once, preferring to stick with the decision made after that. Things change!
A cataclysmic change is currently occurring across transport and logistic, but not everyone operating in this area is aware of it! We are currently witnessing new payment methods being offered, generally linked to blockchain. A horde of virtual freight marketplaces and route optimizing software have also appeared on the market. Most of them will fail, but the very fact there are so many coming onto the market shows that there is a real and identified gap, and some will succeed, in current or similar form.
The current battle between Maersk and Amazon for market position shows the movement to all-encompassing door-to-door logistics offerings, with an entirely systemized logistics chain. We are moving away from freight management as currently offered by logistics companies, but where are we moving to? Here are my three predictions for the new age of logistics and transport.
As anyone with any experience of it will tell you, purchasing is partly an art and partly a science. While purchasing negotiation may seem a little intimidating at first, the most important thing to remember is that it's something anyone can learn. Although there are buyers who make the process look like magic, they're able to do so only because they have so much experience. As long as you're willing to practice negotiation with suppliers regularly, actively engaging in the process, it will likely take you less time than you expect to become very skilled at it.
The future of procurement is very exciting, as it is poised to become a driver for business innovations that becomes more strategic, more collaborative, and more technology-driven than ever before. Last week during our Procurement Quarterly Meetup, we were privileged to have Mark Lamb, General Manager at CIPS Asia Pacific, as our guest speaker.
Mark has more than 25 years working in various sectors, including procurement and supply chain, both at a local level and for global organizations. In his 30-minutes presentation, he looked into key trends of procurement and supply environment, and how global supply chains are increasingly disrupted by both physical and idealogical battles. He urged senior procurement professionals to emphaisize more on becoming effective change leaders to influence policy and change behavior of supply chains stakeholders.
I’m a sci-fi lover, always have been, ever since first watching Star Wars as a kid. One of the things that has always fascinated me most about sci fi is the technology, the weird and way-out gadgets that used to amaze me but that somehow now don’t seem so funny or far-fetched anymore. If we look forward 40 years from now, where in our wildest dreams might we find ourselves. I encourage everyone who reads this to just take a moment to have a think about this, but for now, focus your thoughts just in terms of procurement and logistics. To start the ball rolling, here are some of my thoughts, wild as they may be.
The success of strategic sourcing initiatives relies upon highly qualified, skilled CPO talents that are experts at what they do. The human element is the driving force behind any managerial movement, and in order to transform operations for the better, it is essential to have a top performing team on your side. In order to attract and retain the top CPO talent it is important to be prepared for some of the common challenges that lie ahead. These challenges (and their solutions) are outlined below.
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