Are you practicing I.A.M or C.A.M.?

Procurement professionals at both the beginners and Advanced levels sometimes have the difficulty in mastering the concept of I.A.M. (Individual Acquisition Model) and C.A.M. (Consolidated Acquisition Model) in procurement.

It is necessary to identify which procurement concept you are practicing in your organization in order to stream line the Procurement process thus identify the potential of cost saving. Also bigger Groups are keenly interested in using the consolidation concept and they quickly identified C.A.M. as a revenue stream.

The concept; I.A.M. is slowly disappearing from the Procurement process lay out and C.A.M. is now widely used across the Supply Chain. Well, I should agree that both concepts have its own merit and drawbacks.

Recently consolidations become a buzzword even in smaller organization, when their procurement departments were asked to reduce the landed cost of the goods which they purchased.

So what is C.A.M? In simple words Consolidated Acquisition Model is: I am going to buy a 5 Kilo of Green Apples, but the box is 6 Kilo weigh. Well, I get a better price if I buy the box, but I just don’t want risk myself by buying extra Kg, Oh ok, how about if my sister needed it, or try luck with my neighbor. If it is for my neighbor I will pocket that extra savings, if it is for my sister, still I save via reduced cost. Another version of C.A.M. is: How about buying the Green Apple with standardized description. A different version of C.A.M. is: How about buying the standardized Green Apple of two boxes for my sister and for my neighbor from one supplier. Use one box, preserve the other, or distribute in the market. Another version is: Well, per year my Green Apple consumption is 5 kg each for first six months and 4 kg each for rest of six months that is 9 boxes of apples, why cannot I buy it from the source or principle supplier, I negotiate with them on assured business. Well on a later stage I may include the requirement for a year for my sister and neighbor and of course, I will ask for better prices because I have increased the volume of business to offer for the supplier

I am drawing your attention to a bigger picture here. C.A.M. has a wider scope of practice and can be fitted in various versions, I don’t think that I can explain completely about C.A.M. in just one posting. In brief:

   1. C.A.M is consolidation of requirement in terms of

a.      Quantity,

b.      Quality,

c.      Description,

d.      Brand and

e.      Suppliers

   2. C.A.M is opportunity to leverage on volume of business to offer in terms of spend in

a.      Your organization’s requirement

b.      Your sister concerns’ requirement

c.      Same thinking organization’s requirement

d.      Same sector organization’s requirement

   3. C.A.M. is buying bulk from

a.      The source,

b.      The principle supplier,

c.      The producer

   4. C.A.M is considered as a revenue stream by

a.      Distributing bulk purchased in the market for the current market cost

b.      Charging logistics fee to the sister concerns or to industry peers

c.      Charging service fees to sister concerns or claiming a certain percentage from the savings made for the department, because of the extra efforts made this happen

   5. C.A.M in its wide meaning is a diversified business opportunity in terms of

a.      Procurement and distribution to the market

b.      Logistics of goods and services

c.      Developing and doing business with new sources.

d.      Identifying opportunity for in-house production thus become a producer

So….. Are you still practicing I.A.M? Then you are far behind your peers and I bet you are now or in near future going to switch to C.A.M because its prime potential in cost saving. If you are already practicing C.A.M, then beware and have alternative source of supply (in case) before another volcano eruption and ash cloud disrupt your organization’s operation, you know what I mean.

As usual, I will just illustrate C.A.M. using the following figures please drop me a word if you wish me to share the tools I had prepared on C.A.M.