Gartner Research

Gartner’s Supply Chain Cost Optimization Playbook for Sourcing and Procurement Leaders

Published: 20 March 2019

ID: G00377718

Analyst(s): Miguel Cossio, Paul Lord, Patrick Connaughton, Sam New, Andrew Knight

Summary

Cost optimization is a fundamental responsibility for sourcing and procurement leaders in supply chain. This research provides a framework and top ideas to optimize costs through both short-term tactical improvements and longer-term transformational changes.

Table Of Contents
  • Key Challenges

Introduction

Analysis

  • Operate Better by Improving Pricing, Policy Enforcement and Spend Management
    • Negotiate Better Pricing Conditions With the Supply Base
    • Improve Compliance With Policies and Contract Terms
    • Increase or Optimize Spend Under Contract
    • Increase Automation and Reduce Time Spent on Low-Value, Administrative Activities
    • Negotiate Directly With Subtiers for Raw Materials and Components Used Across Multiple Suppliers
    • Identify, Measure and Control Extraordinary Costs
  • Reconfigure Procurement Processes, Supply Networks and Product Specifications to Reduce Cost
    • Deploy Category Management for Improved Spend Visibility and Control Across the Organization
    • Outsource Noncore Process Activities to Suppliers and Other Third Parties
    • Engage the Supply Base to Identify Cost Optimization Opportunities
    • Reduce Working Capital Tied to Supply Operations
    • Revise Product Specifications to Eliminate Excess Quality and Reduce Material Costs
  • Transform Procurement Capabilities by Deploying Digital Strategies and Leveraging Extended Collaboration Networks
    • Deploy Digital Technologies to Automate and Optimize Manual Procurement Processes
    • Launch a Companywide Cost Optimization Program With Participation of Functional Leaders Across the Organization
    • Implement Total Cost of Ownership Models Across Critical Categories
    • Create Shared Value Partnerships With Strategic Suppliers and External Networks

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