(Solution) MER CIPS Cost Management by Procurement and Supply Management Teams

Solution

As part of PS&M operations, issues linked with cost overruns, time to market, product and service differentiation, these represent capability areas to be developed for achievement of value for money outcomes. Hence, working as a PS&M, improvement areas, progression areas are illustrated in figure 5;

Figure 5:Areas of Improvement as part of PS&M capability

Hence, considering the various factors highlighted in figure 5, through a leverage on Kraljic Matrix, it is possible to acquire capabilities for evaluation of sourcing approaches risks. As evidenced in CIPS (2022a), Kraljic Matrix is important for PS&M identify and minimise supply chain risks encountered. To gain capabilities, the entire faced costs management, risks identifications impacting cost competitiveness in terms of profitability is evidenced (see figure 6);

Figure 6:Kraljic Matrix Analysis Summary

By having the capability to evaluate the supply risks influence for Ericsson organisation influence the sourcing spend category and accrue value for money outcomes. The rationale of this is evidenced by CIPS (2022a) as lowering cost overruns inclusive of likelihood of improved likelihood, appropriate sourcing strategy and all timelines lowered. For instance, by using this tool, sourcing of the vehicles in Ericsson organisation would be categorised as a leverage its category. By leveraging on the acquired capability, PS&M would be in a position to reduce the costs overruns with simple sourcing strategy adopted. In the process, a detailed budget line would be set for the sourcing strategy pursued. Through this, Ericsson supply chain would harness their competitive advantage, flexible suppliers engagement with appropriate standards set.

Further, considering the Aggregation/Consolidation being an appropriate Value Strategy (Khamisabadi et al., 2022), it is applicable. This entail prioritising on costing, risks on quality and reliability, innovation for differentiation and capacity development (See table 1);

Table 1:Aggregation/Consolidation Approach for Capability

The capabilities acquired through the leverage on Aggregation/Consolidation approach by Ericsson would guide PS&M in being able to evaluate on competitive advantage in their supply chain, hence increasing efficiency. This is while developing a direct and transparent selection approach providing an appropriate change to improve and come up with best decision informed by capacity development strategy. Also, capability of managing supply chain risk in the area of quality and reliability is achieved successfully. The challenges prioritised in this regard include costs and employees engagement with various suppliers in the entire supply chain. Further, prevalent uncertainties specifically in times of financial crisis, need to effectively document the tendering and sourcing process capabilities are achieved.

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