June 14, 2021

Asking the right question

A popular story about the space race in the 1960s recounts how the United States spent millions of dollars trying to develop a pen that could write in the zero-gravity environment of space. Faced with the same challenge, the Soviets found an alternative solution: They used a pencil.

This story is likely apocryphal, but resonates because of a telling insight—too often, we assume that a complex problem will also have a complex answer. Each year, both governments and private sector enterprises spend billions of dollars solving problems and implementing solutions, without always stopping to fully evaluate if there might be a simpler or lower cost solution that would be just as effective. In many cases, the framing of the question blinds us to the range of solutions available. Solving a problem, therefore, should begin with first asking the right question.

One of the core levers of cost reduction that Khareed advises its clients to evaluate as they go about optimizing their procurement spend, is to avoid over-specification. Last year, Khareed helped a major appliance manufacturer reduce their packing costs by 15% by redesigning the mold of the expandable polystyrene (EPS) packing used to encase the appliances. Hollowing out internal sections of the packing sheets enhanced the sheet rigidity while reducing the material required. It started by changing the framing of the question, from “how do we negotiate lower prices for EPS,” to “how do we reduce our packaging costs?”

Elon Musk has used similar thinking in all his projects, most famously in Spacex, where he has dramatically reduced the cost of building a rocket by first simply calculating the cost of materials and using that as an anchor. Such reframing helps crystallize where the costs are coming from and expands the range of options companies have in reducing these costs.

At Khareed we are more than happy to work with our clients to figure out innovative ways of reducing procurement spend. Our services go beyond simply competitive quotations and price negotiations to actually understanding what products and solutions are best for our clients based on their needs and the problem they are trying to solve. If your solution seems too expensive, you may be solving for the wrong question.