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10 Practices to Reduce Procurement Costs

1. Value Analysis (VA)2. Value Engineering (VE): The function of the product or service to be studied, the lowest life-cycle costs, by excluding, simplify, change, alternative and other methods to ach...

1. Value Analysis (VA)

2. Value Engineering (VE): The function of the product or service to be studied, the lowest life-cycle costs, by excluding, simplify, change, alternative and other methods to achieve lower costs.

3. Negotiation: Negotiation is the buyers and sellers for their own goals, to reach a mutually accepted agreement process, which is also the procurement staff should have the basic skills.

4. Target Costing: Management Guru Peter Drucker (Peter F. Drucker) mentioned in the article Five deadly business sins, the third fatal mistakes business is cost -driven pricing.

5. Early Supplier Involvement (ESI): This is in the product design stage, choose to transfer partnerships with suppliers and new product development team triple. By way of early supplier involvement, the new product development team put forward performance specifications requirements for suppliers, using the expertise of suppliers to reduce costs.

6. Leveraging Purchases: The demands of business units different departments, to focus on expanding purchases, then increase the bargaining power of the methods based. Avoid their procurement, resulting in different business units within the organization, to buy the same parts with the same suppliers, but prices are different. At the same time they dont know the circumstances of each other and the circumstances, so they lose many opportunities for savings in procurement.

7. Consortium Purchasing: It occurs mainly in the procurement of non-profit business, such as hospitals, schools, etc., Through the integration of the demand for the different purchasing organization, in order to obtain better quantity discount prices.

8. Design for Purchase (DFP): The strategy - make or buy? In product design stage, the use of third-party factory standard process and technology, and the use of industry standard parts, to facilitate ease of obtaining raw materials, thus, not only greatly reduces the necessary technical support made, but also reduce the production cost.

9. Price and Cost Analysis: This is the basic tool for professional buyers, to understand the basic elements of cost structure, it is very important for buyers, if purchases do not understand the cost structure of goods bought, it can not be understanding of the items bought for the fair and reasonable price, but also lost many opportunities to reduce procurement costs.

10. Standardization: Implementation of standardized, a common design / specifications for different products, projects, fixtures or components, or reduce the number of custom projects, economies of scale capacityHealth Fitness Articles, to reduce manufacturing cost.

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olina is good at electronic components industry, who write this article @ here

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