Insights on Excellence | "Insights on Excellence" Archive

How Companies Can Save, Let Us Count the Ways

by Stephen Hawley Martin
for Virginia Business
April 13, 2006

Think you've squeezed that last nickel out of your company's expenses? You've consolidated vendors, negotiated discounts for on-time payments, even considered buying a consortium for your heavy hitters? Well, don't make the mistake of thinking you've reached the limit of what you can save. The extended enterprise is an endless network of un-mined savings opportunities.

Patricia Moody, a supply chain management consultant, created a blog to collect savings ideas, and was avalanched with ideas from industry leaders and unknowns, everywhere from auto suppliers and aircraft, hotels, electronics, cell phones, to the biggest energy companies in the world, metals recycling, even specialty shippers. She says it was overwhelming, and it took her three weeks to dig out. She deleted the spam, condensed the long suggestions, and categorized all the suggestions into MRO, transportation/logistics, packaging, basic kaizen stuff and even health care/benefits ideas.

Patricia "planted" the blog suggestions in a business novella called The Big Squeeze, which was published last year by my company, The Oaklea Press, and posted each one at the back of the book. Here are a few of the goodies:

Cash, The Gift That Keeps on Giving!

Mike Gray, Supply Chain Evangelist at Dell, believes "it's all about cash. That's why you do supply chain." He offers innovative approaches to managing cash conversion focused on three sources - inventory, receivables and payables. Now we all know that we've worked inventory to death in the last fifteen years of lean crusades - in some cases, our well-intentioned efforts border on corporate anorexia. In North America, for example, where 5000 miles, three or four climates, and a series of big disasters hit every year, inventory might not be all bad!

But there is money in receivables and payables. Offer incentives for early payment and you raise your receivables; hold off on payables, and bingo, same effect. "If you want to cut 10% out of your business right away," Gray recommends, "extend payables by ten days and see what happens, or reduce your inventory, or do both. Not only will you save your enterprise cash today, it's the gift that keeps on giving!"

George Bordon, Vice President of Procurement and Supply Management at Clarke American, a producer of checks and other related products for financial institutions, recalls that 7 years ago Clarke had few procurement processes. Gradually, the company geared up with category management, supplier consolidation, scorecards, a consortium and some supplier development - in total these efforts yielded nineteen percent of annual spend. Not bad for beginners, but after 3 years Bordon noticed a plateau, "the low and even medium-hanging fruit had been picked."

Bordon's team widened their vision to draw suppliers in earlier on new products and service development. They worked on customer satisfaction, adopted the Baldrige quality framework and communicated more intensively. After five years, the plateau had segued into 24.9% savings! "But," says Bordon, "we still had not reached the rate of savings capture seen in the early years." So the company ratcheted up the focus with engagement workshops for suppliers and key company project teams, plus a supplier recognition program. Clarke picked up another 3.7% savings.

Next steps? The team is taking a hard look at logistics, and more long-term arrangements with suppliers. Bordon says "we're on track to deliver another 5.2% savings in year seven, and to deploy new product offerings with our suppliers that will drive significant additional revenue and profit."

Now that's impressive.

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Stephen Hawley Martin is a former principal of The Martin Agency in Richmond and the author of more than half a dozen books including his newest, Lean Enterprise Leader: How to Get Things Done Without Doing It All Yourself. He is editor and publisher of The Oaklea Press, a book publishing business dedicated primarily to helping business executives increase productivity.