The closest we come to a methodology that is used in Smith & Conquest across our procurement and supply-chain offerings is the tool and process known as “zero-based pricing”.
Zero-based pricing was developed, as a concise set of methods, inside Polaroid in the US in the early 1980s. Put simply it is a set of techniques enabling buyers and supply chain professionals to both understand the cost basis for the products and services they require, but also to assist vendors in assessing the true costs and profit in their offerings, while identifying significant extra opportunities for cost reduction. See figure 1 for a graphical representation of how the normal focus of cost reduction negotiations is significantly broadened with a more thorough-going understanding of the cost base underlying vendor pricing.
* Zero Base Pricing / Achieving competitiveness through reduced all-in-costs by David N .Burt, Warren E. Norquist, Jimmy Aklesaria.
Smith & Conquest also uses total cost of ownership models (see figure 2 below) to assess total costs of SKU and vendor categories
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where TCO = total cost of ownership A = acquisition cost P.V. = present value at the company`s cost of money ∑ = the sum of the terms in ( ) from years i to n Ti = training cost in year i Oi = operationg cost in year i Mi = maintenance cost in year i |
* Zero Base Pricing / Achieving competitiveness through reduced all-in-costs by David N .Burt, Warren E. Norquist, Jimmy Aklesaria.
Of the nine main packaged areas of procurement and supply chain management on which we focus, there are two, or possible three, service categories that cover the elements of the spectrum. These concern procurement management and all the associated contract, tender and claims issues that are allied to this objective; and financial oversight of procurement and supply chain strategies, covering both budgeting and cashflow forecasts and analyses (see figure 3 below).
The third category of Smith & Conquest work covers supply chain management and supplier base optimisation, which often go hand-in-hand and lead to both a fuller value-based understanding of the supply chain based on a set of pre-agreed objectives, but also serve to build a set of relationships based on principles of quality assurance, delivered value and dependability of supply.