Procurement contribution to improved EBIT through optimization NPD process
What clients say
Start
Shortly after starting my new interim role I was asked to do a final negotiation with a 3rd party supplier. A project team had worked on developing a new range of ‘products’ for almost a year with a new supplier. Notwithstanding the negotiations that had taken place during the development phase, there was still no consensus on the final cost price.
I couldn’t change the status quo, as a consequence the sourcing process had to be done all over again.
Approach
Taking the lead from my procurement role I organised a brown paper session on the NPD (New Product Development) process with the same team. All process steps were identified, the go/no go moments clearly stated and the development costs, where possible, pushed forward.
With the newly developed sourcing process, 3 pre-selected suppliers were visited, by Marketing and Procurement together and reviewed based on pre-qualification criteria, with a clear ‘target price’ in mind. Based on the best performance, including test runs and quality panels, the final supplier was selected and the development process followed accordingly.
Result
The final result was a range of products that met all quality requirements and staying below both ‘target price’ and development budget. More importantly, the whole process had taken less than 6 months, a reduction of over 50 %.
The NPD process template has been used for other development projects thereafter and resulted in a reduction in ‘time-to-market’ of 4-6 months, resulting in earlier retail sales with the same number of months.
Procurement proved it can add value to a business and contribute to an improved EBIT.