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Have you ever been in a meeting with an internal stakeholder who doesn’t want any help on their category because it’s too complex, or is the creative service
that can’t be effectively sourced or managed by anybody but the
supplier and that stakeholder himself?
In the Business Week article “The Cheapest Suits in Hollywood�/a>,
Ron Grover tries to explain the recent financial success of FOX (NWS). One
piece of course is having movies that people want to see - including my
children’s�favorite Horton Hears a Who. The second piece is making those movies for less money than anybody else.
Horton, which features the voices of Jim Carey and Steve
Carrell, was made for just over $85 million. According to Grover,
that’s nearly half of what a typical Pixar animated feature costs. But
how do they do it?
The most interesting strategy appears to be on Special Effects,
where FOX has hired an “in-house effects czar,�i.e. a category manager
to control the cost and value of special effects used for FOX film
projects. Unfortunately, they don’t identify this film world supply
management pioneer by name, but they do talk about some of the
strategies they employ:
- Competing special effects houses to get the best price
- Multi-sourcing - using several shops on a single project to take advantage of individual strengths and maintain competitive pressure
What can you take away from this?
FOX staffed this position based on an understanding of their spend -
where controllable costs exist on their film projects - and made a
strategic investment in staff that would have the
knowledge that could make a difference in controlling those costs.
Which categories in your organization make a material difference in
financial success and what is your source in category knowledge?
Second, the strategy outlined in the article leaves most of the decision making
to the producers of the individual films. While FOX certainly plays a
role in managing negotiations and influencing strategy, most of the raw
decision making is left in the hands of film producers. Just about
every sourcing organization I know has, at one time or another, gotten
bogged down in real or perceived dilemmas of who will be “in charge�of
a category that can be the equivalent to Napoleon fighting a winter
land war in Russia.
Think about the strategies used by FOX Studios the next time you go
to work on a complex category and you’ll improve the chance that your
project will be “green lighted.�/p>
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