Article
Direct Material Value Transformation (DMVT)
How to continually generate sustainable value in further maturing and competitive procurement environments
Many organizations have professionalized their direct material procurement in recent years, yet pressure on continually leveraging savings potential remains the top priority of today´s CPOs – but how can companies manage to achieve savings continually in a mature market? Deloitte´s DMVT delivers a well-established and proven approach.
DMVT basic principle
Direct Material Value Transformation (DMVT) is a holistic approach to constantly develop an advanced procurement organization. Thus, it combines a balanced assortment of short-term actions to achieve immediate cost reductions and mid-term initiatives focused on sustainably developing the organization to accomplish optimal material costs, sustainable cost savings and at the same time increased product performance. Over time, this approach delivers comparatively higher and more sustainable cost reductions.
The DMVT approach is based on the four following pillars for the constant improvement of a procurement organization:
- Execution Quality
Ensures that basic procurement methodologies such as category management, supplier management and negotiations are effectively performed to achieve optimal results. - Training and Skills
While methods and tools can be optimized rapidly, it is also essential for procurement performance to develop the relevant capabilities of buyers for example by means of structured employee qualification programs. - Reduce Product Complexity
By using Value Analysis and Value Engineering, the deep product know-how of interdisciplinary departments can be leveraged to identify customer value creation and eliminate unnecessary cost drivers. - Advanced Supplier Collaboration
On the one hand it involves restructuring the supplier portfolio, on the other it allows the formation of strategic partnerships with innovative suppliers to enhance own value creation.
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