The Supply Chain Cost Management: The Aim & Drive Process for Achieving Extraordinary Results

257 Pages·2007·2.72 MB·English

by  Jimmy Anklesaria

PraiseforSupplyChainCostManagement
‘‘IhaveusedtheAnklesariaCostRoadmaprepeatedlyoverthelasttenyearswith
threeorganizations,togreateffecteachtime.Wehavebeenabletotakemillionsof
dollarsoutofsupplychaincoststhroughknowingjusthowmuchthereisthatcan
beavoided,eitherbyidentifyingandjointlyremovingthosecoststhatarenotvalid
forus,orthroughhelpingsupplierstakedowntheirowncostbase.TheAIM&DRIVE
processisagreatwaytogetastructuredstart,runningtheprocessinparallelwith
multiplesuppliers.’’
—NeilA.Deverill,ExecutiveV.P.Procurement,AngloAmericanplc.
(formerlywithPhilipsandElectrolux)
‘‘I have been personally involved with Anklesaria’s AIM & DRIVE process over the
pastseveralyearswithtwolargeemployers.Theprocessreallyworks...!Ihaveyet
tofindanyothermethodologythatprovidesacomparablereturn-on-investment.’’
—SteveKesinger,VicePresident,Procurement,Nordstrom
‘‘TheAIM&DRIVEprocessis thefacilitatorofchange.Itgivesfocusanddirection
tothecostmanagementeffort.Seniormanagementmusthaveanunderstandingof
theprocess.Theyhavetovalidatethetargetsandtheyhavetomakeacommitment
toparticipate. Withtheabovein place,AIM&DRIVE isapowerful toolthat turns
goalsandtargetsintorealchange,realbottomlineimpact.Thisishardwork,but
watchingateamanalyze,identify,learn,andstructureoptionsforactionisreally
‘neat stuff.’ We looked at several tools to incorporate into our cost management
effort and chose AIM& DRIVE. The approach gave us thedefinitions, the work pa-
pers, and the methodology to build the entire cost management program for our
marketing community. We didn’t want to bring in a bunch of consultants, teach
them our business, give them our data and processes, have them tell us what we
knowalready,andthenleave.AIM&DRIVEallowsustobuildaninternalknowl-
edgebase,pointstheprocessownerstothecostdriverandpromotesreal,permanent
change.’’
—BobQuinn,DirectorofBusinessOperations,IBMCorp.
‘‘I cannot believe that my teams and I have been using AIM & DRIVE techniques
since the very early 1990s! This is surely testimony to the value, durability, and
relevanceofAIM&DRIVEasavaluablewaytocollaborativelymanagecostthrough
thesupplychain.Managingcostisalwaysasensitiveissuewithsuppliers.However,
theAIM& DRIVEprocesshascontinuallyprovenitsvaluebygettingpasttheemo-
tionsandgettingtorealcostmanagementsolutionsthatbenefitbothparties.’’
—JohnProverbs,SeniorDirector,SupplyChain,KLA-Tencor
(formerlywithIBMandHewlett-Packard)
‘‘If you’re interested in sustainable supply chain advantage along with break-
throughcostreduction,readJimmyAnklesaria’sbook.AIM&DRIVEisaprovenand
robust process to systematically take cost out of your supply chain versus simply
transferringcostselsewhere.Jimmy’sextensiveexperiencewithmanypremiersup-
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plychainpractitionersprovidesinvaluableadvicetoanyoneseriousaboutsupply
collaborationandgenuinecostremoval.’’
—JoeSandor,Hoagland-MetzlerEndowedProfessorofPracticeinSupplyManagement,
TheEliBroadGraduateSchoolofBusiness
‘‘AIM&DRIVEisoneofthemainprocesseswehaveimplementedatNokiaSourcing
andProcurementinthescopeofMaterialCostLeadership.Thesystematicapproach
ofthismethodologyandtheanalysisofthekeycostdriverscombinedwithoursoft
skills,reflectedintoour‘PassionandTrust’values,have producedaclearadvan-
tage for Nokia at the system level. We have now fully deployed AIM & DRIVE at
Nokiaforallcomponentsolutions.AIM&DRIVEisalsoplayingamajorroleinour
overallcooperationandcollaborationwith oursuppliers’networkin averyposi-
tivepartnershipspiritwhichisthefoundationofourstrategy.’’
—Jean-FrancoisBaril,SeniorVicePresident,
SourcingandProcurement,NokiaCorporation
‘‘Anklesaria’sAIM& DRIVEprocesshelpedtoopentheeyesofprocurementprofes-
sionals and generatedvalue-added and breakthrough ideas atDeutsche Telekom,
whichweneededtoimprovethebottomline.’’
—HansHeith,ChiefProcurementOfficer,DeutscheTelekom
‘‘I have led the execution of the AIM & DRIVE process in two major corporations
(TexasInstrumentsandMotorola)foroverthirteenyears.Thisprocesshasyielded
greatercostreductioninthesupplychainthananyothermethodIhaveseenused.
ItisalsooneofthebestprocessesIknowoftostrengthenpositiverelationshipswith
suppliers and has facilitated placing my company as the ‘most favored customer’
statuswithoursuppliers.’’
—ErnieCook,formerChiefProcurementOfficer,
CommunicationsComputingGroup,Motorola
‘‘TheteamstrainedintheAIM&DRIVEprocessdeliveredimpressiveresults.Itmade
nodifferenceifthesupplierwasdomesticorforeignorwhatthecommoditywas.If
therewasacostremovalopportunityitwasuncoveredandimplemented.Theproc-
esshelpedinovercominginternalbarrierstoimplementationofchangeatboththe
customerandsupplier.’’
—PhilKeller,formerManagerProcurementProcess,DuPont
‘‘I have been engaged with Jimmy Anklesaria’s AIM& DRIVE process over the past
fifteenyearswiththreetopemployers,soontobefour.Theprocessesareoutstand-
ing!Thereisnootherprocessthatyieldssignificantresultseverytimeregardlessof
thecategory.Everybuyer,engineer,andstrategicsourcingpersonmusthavethese
tools,processes,andmethodologiesintheirintellectualtoolbox.’’
—TomPiersa,VicePresident,Procurement&SupplyChainManagement,
AlliedWasteIndustries(formerlywithEastmanKodak,
YorkInternational,andMaytag)
‘‘I really believe in Jimmy Anklesaria’s AIM & DRIVE process and have personally
seentheresultsatIBMandMotorola.Therearefewprocessesthatdeliveragreater
returnoninvestment.’’
—TheresaMetty,Chairperson,InstituteofSupplyManagement
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SUPPLY CHAIN
COST MANAGEMENT
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PAGEiv
SUPPLY CHAIN
COST MANAGEMENT
The AIM & DRIVE(cid:2) Process for
Achieving Extraordinary Results
Jimmy Anklesaria
AmericanManagementAssociation
NewYork•Atlanta•Brussels•Chicago•MexicoCity•SanFrancisco
Shanghai•Tokyo•Toronto•Washington,D.C.
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informationinregardtothesubjectmattercovered.Itissoldwith
theunderstandingthatthepublisherisnotengagedinrendering
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otherexpertassistanceisrequired,theservicesofacompetent
professionalpersonshouldbesought.
AIM&DRIVE(cid:2)isaregisteredtrademark,andisusedwith
permission.FormulaBasedCosting(cid:3)istrademarkedbyJimmy
Anklesariaandisusedwithpermission.
LibraryofCongressCataloging-in-PublicationData
Anklesaria,Jimmy.
Supplychaincostmanagement:theAIM&DRIVEprocessforachieving
extraordinaryresults/JimmyAnklesaria.
p. cm.
Includesbibliographicalreferencesandindex.
ISBN-13:978–0-8144–7475–4
ISBN-10:0–8144–7475–6
1. Industrialprocurement—Costeffectiveness. 2. Industrialprocurement—
Costcontrol. 3. Businesslogistics—Management. I. Title.
HD39.5.A55 2008
658.7(cid:2)2—dc22 2007013645
(cid:4)2008JimmyAnklesaria.
Allrightsreserved.
PrintedintheUnitedStatesofAmerica.
Thispublicationmaynotbereproduced,
storedinaretrievalsystem,
ortransmittedinwholeorinpart,
inanyformorbyanymeans,electronic,
mechanical,photocopying,recording,orotherwise,
withoutthepriorwrittenpermissionofAMACOM,
adivisionofAmericanManagementAssociation,
1601Broadway,NewYork,NY10019.
Printingnumber
10 9 8 7 6 5 4 3 2 1
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Thisbookisdedicatedto
mywife,Jennifer,
myson,Zubin,
daughters,JasmineandAviLynn,
and
Tomymentorandfriend,
GeneRichter
(1937–2003)
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PAGEviii
Contents
Foreword by Theresa Metty xi
Preface by Dave Nelson xv
Acknowledgments xix
1. Introduction 1
2. The AIM & DRIVE Process of Cost Management 7
3. Agreeing on the Need to Manage Costs 29
4. Identifying Critical Costs in the Supply Chain 55
5. Measuring Secondary and Tertiary Costs 79
6. Defining the Key Cost Drivers and Developing Strategic Options 101
7. Reducing, Eliminating, or Changing Activities That Cause Costs 123
8. Implementing an Action Plan 161
9. Verifying the Plan with Cost Monitors 185
10. Eternally Improving and Leveraging the Process 205
Index 225
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