A penny saved or…
Silly decision?
In today’s instalment of Silly Decisions, we’re sharing the tale of a team trying hard to cut costs – and achieving the exact opposite. Let’s take a look at what happened…
A resistor distribution company usually buys and sells resistors by the thousand, so negotiating a discount on one of its top sellers seems like a good way to cut costs and boost profits.
But disconnected planning means the discount they get isn’t quite what it seems…
The commercial team negotiate a penny off every resistor they buy, which sounds like a solid saving. But nobody notices that the new deal means the resistors now come unboxed. So their supply chain partner has to spend more on packaging – passing that cost on to them.
The end result? The resistor company spends more on packaging than it saved with the discount – achieving the opposite of what it set out to do.
It’s the kind of story we hear all the time – good intentions backfiring because of disconnected planning. But the good news is, it’s not inevitable. Integrated business planning (IBP) joins the dots within complex businesses, helping teams make decisions that make sense for everyone.
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