Tag Archives: cost improvement

Managing when revenue is down


This week’s Wall Street Journal really made me think about how procurement and Supply Chain Professionals must modify strategic direction to help their firms survive; Apple’s overall revenue declined 14.6 %. Caterpillar reported another sharp decline and cut back its outlook indicating the 4-year slide will continue and 3M also trimmed its sales outlook.

While these news stories show slow economic growth, they should serve as an alarm to professionals in procurement and supply chain–it is essential that the total focus includes process redesign, aligning the supply chain and implementing lean techniques. From my experience, I understand that cost improvement is the key to survival to organizations experiencing sales decline.

  1. Supply chain leaders must understand lean and apply waste reduction and productivity improvement across all tiers of the supply chain. When profits are falling, it is essential that all organizations capture all leakage of profits through waste and lost productivity.
  2. Procurement and supply chain processes be reviewed and redesigned to assure that the total focus and mission relates to cost improvement, which assure that all effort is dedicated to the task at hand maintaining profitability in the wake of falling sales. This doesn’t mean just price reduction, but true total cost improvement.
  3. Procurement must align its suppliers with the mission of cost improvement. Suppliers must understand that the current economic conditions require supply chain alignment and lower cost to survive declining sales.

While these things are common sense, it is essential that as supply chain and procurement leaders, we have a direct impact on profitability, shareholder value and, ultimately, we have a fiduciary duty to help the organization weather the economic storm and survive.

We asked for a seat at the table; the time for action is now.