“How to Hit a Moving Savings Target”
Lately, many supply chain professionals have found “business as usual” to be anything but—with price volatility, rising costs, and general uncertainty seemingly the only constants in the market. To some extent, higher prices reflect higher costs for labor and materials; in many cases, prices are increasing faster than underlying costs (and changing as often as monthly). Last month’s tip explored the benefits of preemptively stockpiling critical items ahead of potential price hikes. But just because the price now is lower than a looming future price doesn’t automatically make it a good buy. It also doesn’t guarantee that the price won’t change between now and then. So when you’re aiming for a moving target, how can you know if now is the right time to “shoot your shot”?
Benchmark early, and benchmark often. It sounds simple, but it’s the best way to avoid being surprised by “surprise” price hikes. What you might have considered a bad price last month might be a good price this month, and the only way to know is to verify with good information.
A regional community hospital recently learned the value of frequent benchmarking, averting a 16% unexpected cost increase. The hospital had approval to buy three diagnostic imaging systems, but they received updated quotes that included added tariff costs (and a not-so-subtle “CUSTOMERS RESPONSIBLE FOR ALL TARIFFS AND DUTIES!!” line item). The hospital resubmitted the quotes for benchmarking, only to learn that the tariff did not yet apply to the equipment they were buying. With that information, they demanded new quotes from the supplier, issued a PO, and beat the tariff. The hospital used better information to hit their moving savings target—and saved $82,000 in the process.