{"id":3215,"date":"2012-11-28T21:10:00","date_gmt":"2012-11-28T21:10:00","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2012\/11\/28\/value-creation-cost-minimization-are-not-mutually-exclusive-beware-of-treating-them-as-if-they-are\/"},"modified":"2021-07-06T08:50:12","modified_gmt":"2021-07-06T12:50:12","slug":"value-creation-cost-minimization-are-not-mutually-exclusive-beware-of-treating-them-as-if-they-are","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/value-creation-cost-minimization-are-not-mutually-exclusive-beware-of-treating-them-as-if-they-are\/","title":{"rendered":"Value Creation & Cost Minimization Are Not Mutually Exclusive: Beware of Treating Them As If They Are!"},"content":{"rendered":"
<\/div>\n

It has been decades since top-notch procurement has been recognized as a means of ensuring an uninterrupted supply of high quality goods and services, from responsive and responsible suppliers, at the minimum total cost of ownership.\u00a0 Cost minimization, if you will.<\/p>\n

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As procurement departments approached excellence in their cost minimization activities, the procurement function itself expanded to encompass more things:\u00a0 collaborating with suppliers on joint process and product improvements, soliciting and implementing innovative ideas from the supply base, establishing the inbound supply chain as a source of competitive advantage and growth of market share, etc.\u00a0 Value creation, if you will.<\/p>\n

In many evolutions \u2013 music, fashion, romantic relationships, business, and more \u2013 people embrace \u201cthe new\u201d and sneer at \u201cthe old.\u201d\u00a0 Perhaps it is an innate human tendency.<\/p>\n

But I\u2019m telling you right here, right now:\u00a0 beware of allowing that tendency to force you to treat value creation and cost minimization as mutually exclusive, because they are not.\u00a0 It has concerned me that I have heard some sketchy procurement consultants and wet-behind-the-ears procurement leaders say the equivalent of \u201cWe\u2019re focused strictly on value creation\u2026cost minimization is old school!\u201d<\/p>\n

I\u2019ve heard similar statements often enough lately to consider it a trend.\u00a0 A disturbing one.<\/p>\n

Now, don\u2019t get me wrong, value creation is definitely something that needs to be among today\u2019s chief procurement officers\u2019 top priorities.\u00a0 But cost minimization needs to be up there as well.<\/p>\n

Incurring the minimum total cost of ownership for products and services from an optimized supply base that meets quality, delivery, support, and social responsibility standards is a timeless procurement goal.\u00a0 It\u2019s just good, basic business.\u00a0 To maximize profit improvements, revenue must increase and cost must decrease.\u00a0 It\u2019s an accounting fact and it isn\u2019t going to go away.\u00a0 Any good CEO will demand that costs be kept under control.<\/p>\n

So do both:\u00a0 create value and<\/span> minimize cost.<\/p>\n

I may pat you on the back if you tell me you\u2019ve long ago donated your leisure suits and haven\u2019t used the phrase \u201cgag me with a spoon\u201d since the \u201980\u2019s.\u00a0 But if you tell me that you are no longer are concerned with cost minimization only value creation, I may have to hand you a copy of my book, The Procurement Game Plan.\u00a0 And by \u201chand you a copy,\u201d I mean \u201csmack you in the head with it.\u201d<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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