143 5.1 INTRODUCTION
The main purpose of this research was to identify how and where the Value Chain cost reduction process and the Procurement cost reduction process integrate. The main question that needed to be answered in this research was: What should the specifications of a software solution be that will integrate the Value Chain and Procurement cost reduction processes in a manner that will ensure maximum sustainable bottom-line savings for companies in the manufacturing or service industries?
An online questionnaire, based on the literature review of chapter 2 and 3, was used to solve the research problem. The questionnaire consisted of 20 questions which were grouped as follows:
a. General cost reduction questions: Question 1
b. Value Chain cost reduction process questions: Questions 3 c. Procurement cost reduction process questions: Questions 5, 6
d. Value Chain and Procurement cost reduction process integration questions:
Questions 2, 4, 7, 8, 9, 10, 11, 12, 13, 16, 17, 19
e. Integrated cost saving system requirements questions: Questions 18, 20
The results of each question will now be discussed, as well as the conclusions which could be drawn from the results of each question. The goal is to be able to identify the integration point between the two cost reduction processes by the end of this chapter and therefore solve sub-objective three.
144 5.2 RESULTS OF SURVEY
Discussion: Question 1 5.2.1
The purpose of this question was to determine how important the implementation of cost reduction processes is for companies, as well as on which areas in the business they focus.
Question 1 5.2.1.1
Has your company implemented a formal cost savings process in the last five years?
Figure 38: Question 1 Results Results
5.2.1.2
a. 19% of companies did not attempt to reduce their costs.
b. 21% of companies implemented a formal Procurement cost reduction process.
c. 5% of companies only implemented a formal cost reduction process in their Value Chain.
d. 55% of the companies implemented a formal cost reduction process in both the Value Chain and Procurement although not necessary at the same time or in a formal way.
145 Conclusion
5.2.1.3
a. In total, 81% of the companies attempted to reduce their costs by implementing a cost reduction process in the Value Chain and/or in Procurement. This illustrates the importance and need for cost reduction processes.
b. Fewer companies attempt to reduce cost on the Value Chain than in Procurement if they focus on only one area of the business.
c. The reasons why only 19% of the companies attempted to reduce costs could be a lack of knowledge and skills; a lack of a process and system; or the companies were protected against cost pressure during the recession.
d. It is unclear if the companies attempted to reduce costs in both areas at the same time.
Impact on methodology 5.2.1.4
There was no specific impact on the cost reduction methodology although the results indicated the need and importance to reduce company costs.
146 Discussion: Question 2
5.2.2
The purpose of this question was to determine if companies feel that it is important to implement both the cost reduction processes at the same time, hence creating an opportunity to integrate the two processes.
Question 2 5.2.2.1
Do you believe that a Value Chain (whole company excluding Procurement) cost savings process should be implemented at the same time as a Strategic Sourcing (Procurement savings) process?
Figure 39: Question 2 Results
Results 5.2.2.2
a. 91% of the respondents believed that both the Value Chain and Procurement cost reduction processes should be implemented at the same time.
b. 9% believed that the cost reduction processes should not be implemented at the same time.
147 Conclusion
5.2.2.3
The majority of the respondents believed that the two processes should be implemented at the same time to reduce the costs of the total company. It can thus be assumed that they believed that is possible and that it would add value to implement the cost reduction processes at the same time.
Impact on methodology 5.2.2.4
There was no direct impact on the methodology. The responses however did demonstrate the need to implement the two cost reduction processes at the same time.
Discussion: Question 3 5.2.3
The purpose of the question was to confirm if companies do have a cost reduction system which provides for the majority of the phases found in the Value Chain cost reduction process. Due to the fact that the Value Chain controls the budget, determines the product and service requirements, and is more complex than Procurement, it was more important to determine if a Value Chain cost reduction system was used by the companies.
Question 3 5.2.3.1
Have you made use of a formal Value Chain cost reduction software system which had all of the functionality listed below?
• Set the budget
• Analyse cost of activities
• Capture and manage ideas
• Develop project plans
• Develop KPI’s
• Track and report savings on each initiative? (Excel excluded)
148 Figure 40: Question 3 Results
Results 5.2.3.2
a. 72% of the respondents indicated that they had not utilised a cost reduction software system with all the functionalities listed in this question.
b. 22% of the respondents indicated that they had used a system that had these functionalities.
c. 6% of the respondents indicated that they had used a combination of systems to give the same result, or that they had used systems to reduce costs but these systems did not include all the phases in the cost savings process.
Conclusion 5.2.3.3
Based on the responses to this question it is clear that the majority of the respondents had not used a cost reduction system which provided for the phases an in Value Chain cost reduction process. The reasons for this could be that they did not have a system, or they did have a system but it did not have the functionalities to provide for all the phases found in the Value Chain cost reduction process.
149 this survey (refer to Questions 9 - 16).
Discussion: Question 4 5.2.4
The literature review showed that companies tend not to implement Value Chain and Procurement cost reduction processes at the same time. The purpose of this question was to determine the main reasons for companies not to implement both cost reduction processes at the same time. The author needed to take this information into account when developing the integration methodology. The most likely reasons listed were identified during the literature reviews in chapter 2 and 3.
Question 4 5.2.4.1
Please select one or more reasons why you believe that companies do not implement both the Strategic Sourcing and Value Chain cost savings processes at the same time? You may choose more than one.