Collaborative Cost Reduction
Companies often have only a small development department, but a large number of suppliers. Collaborative cost reduction enables the experience and intellectual capital of suppliers to be used to supplement a company's own development capabilities. The suppliers are closely involved in the process of making cost cuts and, in return, the savings are shared. Sharing in the savings gives the suppliers a strong incentive to help find new cost-cutting ideas, and to communicate these to the customer.
To achieve a spirit of partnership and open cooperation between equals, it is essential to initiate a process of systematic communication with the suppliers identified as the best candidates. Communicating clearly and directly the intention of sharing savings is highly recommended.
As a first step, all the ideas contributed by the suppliers are collected; sending suppliers a standardized form makes the process easier. Where a large number of suppliers and individual contributors are involved, consider making the form conveniently accessible online. Besides a description of the idea, the form should include other important information such as the amount of potential savings, the possible timing of implementation, the likelihood of implementation, and the effort and expense involved. Having just this basic information will make it quick and easy to select and prioritize the ideas.
One of the most important factors for success is ruthless and rapid prioritization and selection of the ideas. During the creative brainstorming process, it is perfectly legitimate to consider any and all concepts, but spending too much time discussing flimsy ideas ties up valuable resources and gets in the way of successful implementation. (In this context, the warning about “not being able to see the forest for the trees” is very apt.)
The selected ideas are then reviewed in terms of feasibility in a discussion process that includes the engineering, quality, production, and controlling departments. Often, an idea will have to be ruled out because the supplier has failed to consider the bigger picture or certain knock -on effects. But if nothing is standing in the way, a business case and an implementation plan can be drawn up and the appropriate responsibilities defined.
Special importance should be attached to the subsequent control of implementation—many companies develop lots of ideas with their suppliers, but subsequently fail because neither takes ownership.