Time is Money in the supply chain!
We all know the saying “Time is Money” but how often when involved in making procurement supply chain decisions is time taken into account? Henry Ford proposed in 1926 that “Time waste is more important than material waste in that there can be no salvage”. In other words if reading this is a complete waste of time to you your time will never be reimbursed! On the other hand, if you were to print this out, you may be able to recycle the paper and salvage some material!
But when we come to supply chain, logistics, procurement and sourcing how much are we willing to pay for time? Is time factored into the price we pay, is it considered as part of the decision? Do you understand the true costs of time when you procure or make another supply chain management or logistics decision?
For example, it is not uncommon for a low cost global sourcing decision to extend the cash to cash cycle from 8 weeks (if locally sourced) to 19 weeks when sourced globally. What is the cost of this to the business in terms of increased risk, the cost of funding additional inventory and the cost of reduced responsiveness? What is the cost of having to manage highly variable ocean transit times which means your items may arrive plus or minus 10 days from the due date originally promised? What is the cost of the increased safety stock you carry to cover this increased time and time variance? Can your “Just in Time” systems cope with this?
As a procurement or supply chain leader the true cost of time needs to be understood and disseminated to your team. Without considering the “T” word, TIME, the “P” word, PROFITS, will be destroyed even if you did reduce the “piece” price significantly.
But when we come to supply chain, logistics, procurement and sourcing how much are we willing to pay for time? Is time factored into the price we pay, is it considered as part of the decision? Do you understand the true costs of time when you procure or make another supply chain management or logistics decision?
For example, it is not uncommon for a low cost global sourcing decision to extend the cash to cash cycle from 8 weeks (if locally sourced) to 19 weeks when sourced globally. What is the cost of this to the business in terms of increased risk, the cost of funding additional inventory and the cost of reduced responsiveness? What is the cost of having to manage highly variable ocean transit times which means your items may arrive plus or minus 10 days from the due date originally promised? What is the cost of the increased safety stock you carry to cover this increased time and time variance? Can your “Just in Time” systems cope with this?
As a procurement or supply chain leader the true cost of time needs to be understood and disseminated to your team. Without considering the “T” word, TIME, the “P” word, PROFITS, will be destroyed even if you did reduce the “piece” price significantly.
Discussion Points:
1. Which of these knowledge insights are challenging and inspiring to you?
2. Which learnings from the past discussed in this action insight have future implications?
3. What action could be taken from utilising this knowledge by you personally or by an organisation to create value?
