Purchasing

Michael Higgs

Cost analysis: Everyone is an expert
July 1, 2008

Over the last few weeks (given the current economy) I have been spending a lot of time working on costs, and (as we all know) everyone is an expert on costs. This last week I was working the structure and cost of a product and had to work with the document control manager and the engineering manager. These people are great people and are very smart, but neither has any experience with supply chain but they are “cost experts.”

Now I will freely admit that I don’t know everything or that I will see all angles, and I do like to have good feedback. So this team was working on a new structure that lends itself to the suppliers’ core capabilities, and should yield a very good cost reduction. We started looking at the structure to ensure it could be done and then started building the current cost. Once this was done I started setting targets, and low and behold the argument started.

Our document control manager claimed I was being unfair to the supplier and the engineering manager told me I was too easy on them. I felt the need to allow them to understand what my concept was and why the targets where set—that was my second mistake. (The first obviously was showing them the costs.) One person wanted to see more data, the other wanted to get the supplier involved in the discussion. Both thought that looking at these other suppliers were in the best interest of the company (I should say that these other suppliers while good have no capabilities in this area, but have really good sales people).

We spent the next three hours talking (or rather debating) about this, and after about 20 minutes we reached what I call paralysis. Paralysis comes when nobody wants to change their opinion and you can go no further. At this point someone has to make a call to move past it or agree to disagree. Unfortunately, for me I kept at it so we wasted a lot of time. In the end nothing really changed and I made the call to move foreword.

I have had these conversations with every level of management and everyone wants to have input with no accountability to missing goals. Now on the other hand, if you hit the goals or exceed them everyone wants the credit. I guess you can not exclude people from the conversation but wouldn’t it be nice. My advice is when you have these meetings agree with folks and indicate that you will take it under advisement and let them know the outcome, then run from the room as fast as you can, but that may not be possible.

I am interested in how some of you handle this, so let me know. Post a comment here on the blog.

Posted by Michael Higgs on July 1, 2008 | Comments (0)