Supply Chain Executive Insight E-Newsletter

Each month the Supply Chain Executive Insight e-newsletter will include brief articles about developments that are often overlooked by other supply chain publications. We will present you with summaries of the latest research as well as new ideas on how to make your supply chain operations more effective. And we'll offer commentary that sheds light on what's happening in supply chains today.
Sign up now!

Free Articles From The Current Issue

Glimmers of hope
Logistics costs plunged dramatically last year as the economy contracted. Preliminary data for 2010 show that a recovery is under way, but shippers still face a host of challenges.

Don't breathe a sigh of relief just yet
Despite the recovery, companies are likely to pressure supply chain managers to cut costs even further.

A bright future... together
We must move beyond the typical approach of "state the problem and talk about the frustrations."

Premium Content Subscriber Login

Identifying critical costs in the supply chain

By JIMMY ANKLESARIA

Companies need to stop beating down suppliers on costs and collaborate with them to control costs for both parties, says Jimmy Anklesaria in his book, Supply Chain Cost Management: The AIM & DRIVE Process for Achieving Extraordinary Results. In this excerpt, he explains how companies can get this process going. The most important steps include understanding how suppliers price their products and identifying suppliers' critical supply chain costs.

From the Quarter 03 2008 issue

On October 21, 1993, the Wall Street Journal published an article by the don of business management, the late Dr. Peter F. Drucker, titled "The Five Deadly Business Sins." One of the deadly sins Dr. Drucker mentions is "cost-driven pricing." According to him, "the only thing that works is price-driven costing. Most American and practically all European companies arrive at their prices by adding up costs and then putting a profit margin on top." He then adds: "If Toyota and Nissan succeed in pushing the German luxury automakers out of the U.S. market, it will be the result of their using price-led costing. To be sure, to start out with price and then whittle down costs is more work initially. But in the end, it is much less work than to start out wrong and then spend loss-making years bringing costs into line—let alone far cheaper than losing a market." Amen! I couldn't agree with you more, Dr. Drucker....

This article is premium content.

CSCMP members and magazine subscribers: To gain access to the full text of this article, log in now.

Not a CSCMP member or subscriber? Join CSCMP now or subscribe to CSCMP's Supply Chain Quarterly.

Not ready to subscribe? Return to the previous page.