Simpler goods development can cut spending by billions

4 June 2003
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05 June 2003 | Robin Parker

Purchasers are in a unique position to help their organisations save billions of dollars by simplifying the development of their goods and services, delegates to the Institute for Supply Management's annual conference were told.

Theresa Metty, senior vice-president and general manager of supply chain operations at Motorola, described how waging a "war on complexity" had cut the mobile phone company's costs by $2.6 billion and removed $1.3 billion from inventory in the past three years.

Metty gave a keynote address to the 1,700 delegates gathered in Nashville, Tennessee.

She told the audience that ridding their organisations of operational "complexity", which she defined as anything that affects a company's ability to be flexible and competitive, is "one of the greatest opportunities that supply managers have to bring change".

When Metty joined the company in 2000, she found that Motorola had up to four times as many models as its competitors and twice as many bespoke parts, each designed by only a single supplier.

One mobile phone came in more than 100 different configurations and required component lead times of more than four weeks.

Metty told delegates: "Our supply chain was huge, so nobody felt it or noticed. We simply didn't notice how out of shape we were until we started losing our market share."

The purchasing-led "war" focused on several areas that were blocking Motorola's ability to be competitive and efficient, including its lack of industry standard parts and re-use of component designs across different products.

Purchasing teamed with other departments, including engineering and finance, to develop a "complexity index" that ranked Motorola's activities against the development of "best-in-class" products and blocked their production if they did not meet agreed criteria.

Through the programme, Motorola discovered it used 78 front displays - the most expensive part of the mobile phone - and 145 batteries for only 100 models of phone.

Metty said Motorola's experiences held valuable lessons for the profession.

"No one else in an organisation is in a better position to identify ways of reducing complexity and no one has as much at stake as the supply management profession," she said.

"We have to step in earlier in the process and influence design, as otherwise we have to deal with it after the launch and learn to live with the pain it inflicts on our suppliers."

SMjun2003

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