|Value Chain Modeling|
Within procurement it is common to look at your product or service costs and try to obtain better deals by changes to the specification or by negotiation, this is you operating at the first tier supplier level. Now if we take a product your suppliers have suppliers themselves and in fact they have suppliers as well and the chain goes all the way down to the man who sells the seed or the iron ore being mined from the ground. To map or model this is fascinating as you will then see the journey your product takes to get to you. Now start proportioning costs to the different levels and start breaking out costs against all the different processes and operations.
A simple product can go through several tiers of suppliers, each with profit, overheads, risk, waste, storage, transport and a whole host of inefficiencies.
Is this easy? Certainly not. Actually if Meercat Associates had £1 for every time it's been told it can't be done for our product as there are far too many variables! We'll we'd all be walking round with a lot of change in our pockets.
Now turn your supply chain upside down and do a small negotiation with the bottom tier, if you take out 5% of costs at this level, what will happen as this carries up the supply chain? 10%-15%-20% by the time it reaches your main supplier? Now you can do your normal negotiation with them as well!
If you're buying the same product over and over again then engineer your supply chain for optimum value!
Through our clear and comprehensive VCM tool the entire value chain of a product or service is modelled and displayed.
The output from this extensive evaluation is a comprehensive value chain model. Here we will identify inappropriate processes or inefficiencies.
It is employed after spend profiling to ensure optimum value for money and to ensure premium value add to your clients.