Today we are fortunate enough to have a guest blog from Dr. Christian Smart. He has given us permission to post the first chapter of new book ” SOLVING FOR
PROJECT RISK MANAGEMENT UNDERSTANDING THE CRITICAL ROLE OF UNCERTAINTY IN PROJECT MANAGEMENT”
The cost of a product is one of the key criteria for product development often backed by ambitious targets during the design phase. When sustainability is mentioned, the first thing that comes to mind for most people is usually, how much is that going to cost me… But is it always a trade-off between cost and sustainability? Or can these two different requirements complement each other to make a superior product that meets both requirements?
As the much-anticipated end of 2020 fast approaches, I thought I’d take a short minute to reflect on a very different year.
We all know and have our own personal experiences with the pandemic. It impacted our health in more ways than just its known symptoms. We have missed out on many family activities, everything from sharing baby’s firsts to grandparents lasts. A very terrible situation for all.
This year marked the start of my retirement. In my past I worked for two of the largest companies in the world GM (and its subsidiaries) and Johnson and Johnson. I am enormously proud and happy to have worked for such great companies. If it were not for these two companies, I would not have been able to see the world, learn what I have learned and most importantly move on to this next chapter.
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During the many years I’ve worked for Purchasing I have seen 2 main types of suppliers with respect to their cost transparency. It would be easy to say that these two types are the all-transparency, open-book companies, and the all-tight, sorry-but-we-don’t-share-that-info company, but there are different shades of grey in between. In general, all companies have a know-how that they must protect, so it is understandable that they might be eager to disclose how they manufacture their product and how much it costs them, with too much detail. Even with Non-Disclosure Agreements in place, some companies are worried that part of their know-how might be slipped into a competitor and therefore might lose the technical advantage they started with.
In times of crisis like COVID-19, reliable cost management processes are required. Suppliers who restarted production with changed capacities are forced to consider and recalculate additional cost factors and changed circumstances. Reduced production and purchase quantities usually lead to renegotiations with customers. Questions regarding cost transparency and negotiation management should be clarified in advance: Under what conditions is the production profitable? Which strategy should be employed in (re)negotiations? Many sales professionals worry that if they share their cost structure with customers, then the buyer will use it against them to negotiate the price down.