Sourcing Strategy: Effective vs Efficient with Ron Crabtree
Joe Lynch and Ron Crabtree discuss sourcing strategy: effective vs efficient. When developing a sourcing strategy, the focus can be effectiveness (gaining desired results) or on efficiency (reducing cost, labor, and resources used).
About Ron Crabtree
Ron Crabtree, CPIM, CIRM, CSCP, MLSSBB, SCOR-P is the founder and CEO (2002) of MetaOps™, Inc. he is an internationally recognized expert in leading-edge business process improvement methodologies. Mr. Crabtree is a Master Lean Six Sigma Black Belt, a Certified Supply Chain Transformation Architect and an expert in effective change management, facilitation, and communications. He has spent more than 20,000 hours providing consulting, training, and facilitation for large and small groups for hundreds of organizations internationally on a wide range of topics. He draws on more than 30 years’ experience in implementing Lean, Six Sigma, Supply Chain and other “best practice” methodologies as both an insider and as a consultant in many international industries including insurance & financial services, state/local government, medical/healthcare, automotive assembly plants, complex manufacturing, process manufacturing, repair operations, printing, injection molding, consumer goods, distribution/retailing, and software and more. Ron is the author and architect of the TOP Facilitator© Program that provides the skills needed for change agents and leaders charged with facilitating organizational transformation.
About MetaOps and MetaExperts
MetaExperts™ are talent operational excellence (OpEx) hands-on-deck, training, and get-it-done partners. MetaExperts™ is not a consulting company, but a global network of OpEx deployment experts and resources for flexible, on-demand short-term contract, or contract-to-hire needs. MetaExperts™ align with your industry and OpEx initiatives (i.e., successes in Lean, business process improvement, change management, etc.) and are vetted through our unique 300+ Screening and Evaluation Process that thoroughly vets each contender’s skill set, toolkits, and experience. Based in Mattawan, MI, the company was founded in 2002.
Key Takeaways – Sourcing Strategy: Effective vs Efficient
- In the podcast interview, Ron explains the difference between sourcing strategies that focus on effectiveness and those that focus on efficiency.
- Effective refers to “producing a desired or intended result.”
- Efficiency refers to “achieving maximum productivity with minimum wasted effort or expense.”
- Attributes of sourcing strategies with an over-emphasis on efficiency:
- Off-shoring to low wage countries or sourcing near the raw material supply points
- Single sourcing to drive price and increase influence (to a point)
- Low bidder mentality
- Focus on price vs. fully understanding the total cost of ownership and factoring in the cost of major disruption risks.
- Just-in-time inventory policies, driving suppliers to carry all the burden of just-in-case inventory.
- Since the suppliers are likely making a low margin, there is less of a relationship and probably little or no loyalty.
- The upshot of all this is the result of now we very brittle supply chains, now inherently susceptible to massive disruption – even by a single event – such as the tsunami event in Japan.
- Attributes of sourcing strategies that focus effectiveness:
- High Adaptability
- High Responsiveness
- Up-side and down-side flexibility of 25% or more
- Response to node failures is robust.
- Perfect fulfillment capable
- Getting into buying consortiums to increase influence and minimize service disruptions.
- Sourcing strategies that focus on effectiveness can withstand disruptions.
- A sourcing strategy’s focus on effectiveness or efficiency is determined on the company’s unique needs. Example: A surgery center or aviation company will focus more on effectiveness, while a company selling high-volume novelty items will focus on efficiency.