Was there any one common denominator in your most significant success stories?
Absolutely. It is a client who is committed to reducing costs and who is willing to follow our unique process. The one thing we cannot do is to help a client who does not want to help themselves.
Why do companies miss the obvious when seeking to contain costs?
They do not do their homework properly and then they make the process too complicated. Too often companies pay a higher price and defend it by hiding behind the relationship. Many companies struggle to get fresh ideas from critical out-of-the-box thinking. In many cases the attitude is if it is not obviously broken, why fix it? Our unique process enables our clients to get a better price, mainly from the same supplier, while improving the relationship and preserving product integrity.
Is the procurement process at all relevant for companies seeking cost reductions?
Of course it is. But our unique and proven process enables our clients to achieve substantially better pricing than if they followed their own proven processes.
What actions do corporations take when seeking to achieve cost reductions that are harmful or "miss the mark"?
The most common mistake a corporation can make is to allow a supplier to intimidate them. Especially with regard to the value of their relationship (if the roles were reversed and they had an important customer that they had good reasons to seek a lower price and they granted that reduction, they would actually strive for an even better relationship in order to avoid situations that would erode the lower margins). For me, when someone uses the excuse of good relationships to defend high prices, it is a big red flag.
Handled correctly, better relationships with suppliers can be developed with those who do not have the luxury of high prices. After all, high prices often finance a supplier's errors or lack of attention to satisfying their customer's needs. It all depends on how you manage the relationship.
Allowing the supplier to threaten or reduce content for a price concession is also very harmful. Sometimes companies back themselves into a corner. And that diminishes their credibility for future negotiations. For example, telling a supplier with a quote for $100 a part that they need to be at $90 a part in order to be awarded a purchase order - and then still awarding them the order if they have not achieved that price level. We have techniques that avoid that situation, even though the order was placed at say $92 a part.