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Smart Tools Let Procurement Experts Design Savings into New Products
Competition is shortening product lifecycles and forcing manufacturers to focus on bringing a steady stream of new products to market. For procurement professionals, the added complexities of globalization, outsourcing, and increased product regulation require finding the right products from the right supplier at the right price at the right time.
Now procurement professionals have access to automated product cost management (PCM) applications that help them analyze the financial and performance characteristics of their materials choices during the initial design stage when those decisions matter most.
Evaluating Costs and Risks
PCM lets engineers share early design information with the sourcing team, suppliers, and production partners. "Manufacturers evaluate the costs and the risks to make sure the design actually achieves the intended business objectives," says Gayle Hayes-Sherwood, Oracle senior director for product strategy. "Early involvement enables sourcing teams to conduct market scans, supplier capability assessments, transformation cost and risk analysis, and make-versus-buy analysis to "right" the product for global production requirements. It also gives product managers the opportunity to bake-in profit margin by avoiding unnecessarily costly redesigns downstream."
Oracle's Agile Product Cost Management module is part of the Oracle Agile Product Lifecycle Management suite of enterprise-class applications. It complements applications like Oracle Sourcing by providing a dedicated solution to manage the content, process, and analysis of bill of materials (BOM)-based sourcing, outsourced manufacturing, and design-oriented collaboration.
"The key is to tie design and business decisions together as new products are being developed," says Hayes-Sherwood. "With PCM, you can initially cost and then continuously manage the new product to its target objectives through all of the design changes."
New Ways to Drive Savings
PCM provides sourcing teams new ways to evaluate market conditions and drive savings. Teams can source BOMs across multiple locations to compare prices from international and domestic suppliers.
"Users have the option to source the entire product, individual BOM assemblies, parts, or any combination forecast across time-based and/or quantity scenarios," she says. "Out-of-box analysis takes all of this information and derives the theoretical lowest cost, uncovering new areas of savings potential."
PCM leverages the PLM product record repository, ensuring all authorized viewers have access to the most accurate design information available. PCM replaces spreadsheets that, when run as a serial process, can't reliably maintain the latest design versions coming out of the engineering department.
The benefits can be impressive. Some customers report 15 percent reductions in product costs, which can have an immediate impact on margin. "With PCM, it's much easier to uncover potential price or cost savings and factor them into the product," she says.
In addition, PCM can help companies bring products to market faster by streamlining real-time interactions throughout the supply chain. "Cycle times that used to take three to four weeks with error-prone, manual processes now take two to three days," Hayes-Sherwood says. "And in markets that reward speed with leadership, it's the early bird that maximizes the margin."
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