Archives July 2021

Developing teams that understand how they can play their part in achieving cost effective solutions to supply chain problems is key to creating value. In this episode Tony Hines discusses what it means to be cost effective and explains why it is necessary for all organizations. 

Being cost effective is a culture that can be developed in any organization achieving more with less. It is a key principle for lean thinking. Everyone in the organization needs to understand cost and their part in the process of using resources wisely. Controlling cost is part of the culture but this is not necessarily just reducing cost. It is about using resources effectively. 

Teams have to act and be responsible for cost within their control. To do so they need to know what these costs are and to do that they need data transformed into information. Dashboards often form the basis for action. 

Agility is important for responding to the unexpected and to manage risk. Lean principles such as lowering waste is one of the pillars of being and acting responsibly when it comes to cost effectiveness.

The team leader plays a pivotal role in developing and embedding cost effectiveness in their part of the organization. The team leader sets direction in line with organization policies and cost effectiveness is a practice. Shared understanding comes from discussing and working with team members to achieve goals. The leader is a motivator and a coach. Find out more when you listen to this episode.

In this episode of Chain Reaction Tony Hines discusses cost concepts that are essential to understand for those managing supply chains. Sources of value and cost in the supply chain and the wider system are examined in the discussions. To achieve supply chain advantage you must understand cost and value. Some of the most important things to understand about costs are direct costs related to the products or activities undertaken and costs that are related to time.  Cost elements are materials, labor and overheads. Risk costs, Cycle Time Costs, Conversion Cost, Non-Value Added Cost and Supply Network Cost are all necessary to control value streams. It is essential that every business understands cost concepts and how they impact the supply chain . Value is created by activities but which activities are creating value and which create cost. Do you know the difference between cost, value and profit? Do you know which costs are related to time or products? Know why this is necessary. Do you know which costs contribute to the profitability of the supply chain?  Listen and find out more.

Value added is another important concept that all businesses need to be aware of. Identifying sources of value and cost is an important supply chain management issue. The difference between input costs and output costs is a measure of value added. Do you know the difference between cost and investment? It is a distinction that should be made carefully. You invest capital to capture future revenue with the investments made.

The Total Cost of Ownership is another financial concept that all supply chain professionals should have some understanding of. The purchase price  of an item is one element of the cost of ownership. There are three elements of cost in TCO which are pre-ownership cost, acquisition cost and post ownership cost. These are examined in the context of supply chains.

Kaizen is briefly discussed in the context of cost in supply chains. Wastage is one of the biggest costs in any supply chain – Mura, Muri and Muda.