Breaking Free From Engineered Results

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Being on the cutting edge of direct materials sourcing for the last decade has taught me one very important thing. Nothing hurts results more than people setting expectations based on false pretenses. Your company can never, EVER, achieve the cost efficiencies that are possible if you work against an arbitrary projection of savings based on bench-marked direct materials sourcing data.

When the traditional strategic sourcing process was developed it was incredibly necessary. It helped remove graft (somewhat) from a system that was often choked with corruption. The traditional process was repeatable and therefore measurable. It was, at the time, an essential way to find the best possible supplier for a particular program. Of course, it was developed before the web and before you could tap into real time open capacity with the click of a button. Unfortunately, when considering engineered to order hard goods, the world has changed and for most people, the process hasn't.

Now, direct materials bench marking is mostly junk science. A lot of people who charge by the hour just cringed. I'm sorry, but it is. Actually, I am not sorry. It makes me angry when companies base projections on this somewhat arbitrary and definitely archaic data gathering methodology to come to a supposedly quantifiable conclusion which is not much more than throwing a dart at a random page of numbers while blindfolded.

Real time, open market data pulled from suppliers with open capacity is readily available. If your direct materials sourcing team, whether they be engineers or procurement professionals, doesn't make use of it, you end up with engineered projections instead of real time true cost data. Engineered results are costing companies money every single day and most of them don't even know it.

Break free!


David Landsman

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