This brings us to this month's topic of the total cost of ownership (TCO) when buying raw material or components from your supply chain. I recently had a refreshing conversation with a group purchasing director keen to help his team understand more about TCO. He argued purchase price could no longer be the sole driver for procurement. I could not have said it better.

Making decisions based on purchase price is narrow-minded. What about the cost of compensating for supplier reliability issues through safety stock? What about the price paid in extra stock for the longer lead times you traded for a cheaper price? And while you ideally operate your material flow on a FIFO basis (first in, first out), I bet you have some smelly FISH as well: first in, still here! So TCO must include the full cost of slow moving and obsolete stock.

The challenge is that these costs are owned by multiple functions. So TCO needs to be underlined by well-integrated sales and operations planning. Otherwise people will still take risks because someone else's department bears the consequences.

Hugh Williams is founder of supply chain planning specialist consultancy Hughenden .