Tuesday 26th May 2020 - Logistics Manager Magazine

Seeking the path to ‘value’

At what point do you achieve the best value? Is it when you achieve the lowest possible cost, or could it be when you receive the highest performance in service at a reasonable cost? Of course, it would seem appropriate to assume that in most cases a balanced judgement is required – service performance vs cost.

Unfortunately, common practice dictates that driving the cost to the lowest possible point returns the best  result for the company’s bottom line. But then does squeezing the margin for your supplier encourage healthy and positive collaboration. Just what level of profit do you think is appropriate for your supplier? Or would you be happy if they made no profit at all, so long as you receive the goods and service you require? Surely, there comes a point where value is eroded – ultimately, ‘you get what you pay for’.

Setting aside the issue that a supplier making little or no profit is unlikely to survive, which from a purely selfish viewpoint would cause a supply problem, little can be achieved in bringing future efficiencies and savings if a supplier’s situation is not considered in a holistic view of a supply chain.

Examples of this less self-orientated, and perhaps more ‘enlightened’ way of thinking, can be found in Japanese and oriental companies, Toyota, Nissan et al. Could it be that a corporate culture of collaboration fits more easily into eastern companies than it does into western enterprises. This idea was raised at a recent roundtable event on Supplier Network Collaboration, organized by Logistics Europe in cooperation with SkyScape Solutions (reported on page 42). Opinion around the table appeared to concur with this view. However, there are questions relating to ownership which are difficult to reconcile in collaborative arrangements.

If the aim of achieving the ‘best value’ is to be attained then participants in a supply value network are going to have to be more open-minded when seeking to collaborate. There are obstacles to overcome, but the best value comes to those who see the light.

Nick Allen, Editor