by Renaud Anjoran
I often tell importers not to focus too much on the factory-gate price when selecting a supplier. There are so many other elements to take into account!
Recently I had the chance to attend a presentation (in a FCCIHK seminar) that emphasized this point. The speaker was Michael Mayringer, director of global supply chain, Bombardier Recreational Products (BRP), Powertrain division.
His company’s changes in purchasing strategy nicely illustrate three levels of sophistication:
Until about 10 years ago, BRP’s “cost reduction programs” were mainly:
This is the way most SMEs still interact with their suppliers.
In 2001, BRP decided to optimize the material cost of its products in a more structured manner. They started to focus on cost instead of price.
They introduced cost analysis methods:
They worked on establishing trust & openness with their suppliers. The objective was open book cost break downs. (Note that BRP is a rather large company, and that it might be very difficult for an SME to achieve the same objective).
These activities proved to be successful for a few years, but the returns were clearly diminishing. So BRP took a more pro-active approach.
They asked themselves this question:
Can we implement a holistic business process (Enterprise Costing) capturing the entire product lifecycle and involving the whole value chain as a sustainable strategy?
They had four objectives:
Here is how they illustrate this new approach:
This approach is based on several elements:
a. Maximum value proposition
b. New form of organization
c. Integrated part of Global Sourcing Strategy and Supplier Management
This third level is clearly a big step toward best practices. Can SMEs not get a lot of inspiration from this example?