Why being precise saves you money

Rick Gambaccini, CEO of Castrol OPTIS looks at the benefits of adopting precision procurement.

Our economy is in a state of flux and US manufacturing is under pressure. Pressure to do more with less, and to find new ways of achieving this. It sounds like an impossible task, but US manufacturing is not for the faint-hearted and there has always been, and always will be, new ways to add value and maintain the future of our sector.

Precision procurement is one such solution. The focus here is on being more specific throughout the procurement function and moving from a ‘should cost’ approach to a more precise one that breaks down and analyses each and every attribute of a component’s production to identify opportunities to unlock cost reductions and optimize processes.

While ‘should costing’ is an improvement on strategic sourcing, in today’s tough manufacturing environment, it is no longer feasible to rely on estimation. It has served its purpose though. Established by the US Department of Defense at a time when unprecedented cost pressures were being experienced, should costing enabled a publicly accountable body to break down purchase prices in a more granular way and to achieve greater transparency and more fact-based decisions.

So should costing was certainly part of the procurement evolution, but it was of its time and in this technologically-advanced era doesn’t go far enough. With the technology, data and analytics that are now available to us there is more that organizations can be doing to extract even greater value from the supply chain. It’s about creating powerful processes that combine the software, analytics and expert knowledge available to determine specific, optimized part costs while maintaining strict quality targets. This is precision procurement.

Measurement is a key success factor. Adding value is about optimizing what already exists and it’s only possible to optimize something if it can be measured. Rapid advances in software can help businesses achieve highly sophisticated measurements, breaking down the machining process to new levels to elicit relevant data and insights that create further value.

Alongside this, it’s worth remembering the final part of the equation. Hard data must be balanced with softer skills and wider knowledge, such as that from the broader supplier network, to be truly effective and achieve success.

To find out more about Precision Procurement and to access case studies, read the eBook from Castrol OPTIS.

About the author

Rick Gambaccini