Leveraging Strategic Procurement at Disney

After breaking down the strategy off Disney yesterday, here is how strategic procurement can make a difference in their strategy as effective cost management is crucial for companies like Disney. With high operational expenses spanning content creation, theme park operations, and streaming services. A key focus should be on determining the optimal balance between producing in-house and outsourcing services and products.

The Challenge

The challenge lies in managing these costs while maintaining the high quality and brand integrity Disney is known for. Strategic procurement can help address these challenges by optimizing the sourcing of services and products.

Key Areas of Focus

1. In-House Production vs. Outsourcing: Disney must carefully evaluate which products and services are best produced in-house versus those that should be outsourced. For example, high-value intellectual properties and core content might be better developed internally to maintain creative control and quality, while more routine tasks or non-core services could be outsourced to specialized vendors to reduce costs.
2. Cost-Benefit Analysis: Conducting a thorough cost-benefit analysis for each procurement decision is essential. This involves comparing the total costs of in-house production—including labor, technology, and overhead—with the costs of outsourcing, which might include vendor fees and potential quality variations. The goal is to achieve the best value for money while ensuring high standards.
3. Value-Based Supplier Selection: Instead of selecting suppliers based solely on the lowest bid, Disney should evaluate the overall value each supplier can provide. This includes quality, reliability, innovation, and long-term cost benefits. Strategic partnerships with suppliers who align with Disney's goals can lead to better outcomes.
4. Strategic Alliances and Partnerships: Competing effectively in the market often requires more than just internal efforts. Disney should leverage strategic alliances and partnerships to create win-win situations for their franchises. Collaborating with other companies can lead to shared resources, innovative ideas, and cost-sharing opportunities that benefit all parties involved. By negotiating favorable terms and maintaining strong relationships with partners, Disney can enhance its competitive edge and market presence. This approach is particularly important given Disney's past financial losses due to competition and ownership issues with parts of their franchises, such as Spider-Man and various Netflix series.
5. Continuous Improvement and Feedback Loops: Regularly reviewing procurement processes and outcomes can help identify areas for improvement. Feedback from suppliers and internal stakeholders can provide insights into how procurement strategies can be refined for better results.

The Impact on Disney

Strategic procurement, with a focus on balancing in-house production, outsourcing, and leveraging strategic partnerships, offers a robust approach for Disney to manage costs effectively. By optimizing procurement strategies across its diverse operations, Disney can ensure it continues to deliver magical experiences while maintaining financial health.

I’d love to hear your thoughts on this approach. Do you agree that strategic procurement can help Disney optimize its costs? What other strategies could Disney employ to enhance its operations?