Knowledge To Negotiate
Procurement has seen lots of changes and new programs that have entered into vogue. Some began with a huge fanfare and ended with relative examples of success quietly. Others have become more ingrained in what one does and how it is performed by you. Just about any one of the programs has a goal of reducing cost.
3. Reduce the resources and expenditure of handling the procurement of goods and services. JIT / Kanban, Pull Replenishment. Draw replenishment, JIT, or Kanban program is designed to reduce the inventory levels a Buyer must bring and push the cost of carrying and managing inventory back to the supplier.
This reduces the Buyer’s investment in inventory and other potential inventory related costs such as space, risk of loss, obsolescence. Supplier Certification. Supplier qualification is a way where Suppliers are evaluated to ensure they have the requisite capability and processes to consistently provide products of high quality. A goal of Supplier Certification is to eliminate the Buyer’s incoming inspection activities with those Certified Suppliers and the resultant cost.
Six Sigma. A Six Sigma process is designed to reduce or eliminate defects that happen which reduces the costs associated with those defects. The reduction of defects can be targeted to reduce the expense of manufacturing or other processes. For example, if the quality of a product can be improved substantially, it gives you to reduce the expenses associated with poor quality such as holding additional inventory, increased inspection, scrap, and rework costs.
Eliminating a defect that triggers dependability problems further reduces field costs such as spare parts and repairs inventories, or field service phone calls. Benchmarking: Benchmarking is the technique by which you compare prices, procedures against other Buyers with the goal of identifying where there could be opportunities to reduce prices or reduce the costs associated with the process.
The cost goal of Benchmarking is to identify where cost savings to either parts prices or processes may be produced to lessen the cost. EDI: Electronic Data Interchange is a method by which orders, changes, etc. are communicated instantaneously, and reducing the impact that postponed marketing communications could have on inventories, cancellations, forecasting, and flexibility. Etc. The cost goal of EDI is to eliminate the errors and cost that can occur with manual buying procedures. It reduces the time to react to orders also, changes etc., where delays often means additional responsibility or inventory.
Credit Card Purchases: Credit Card purchase programs were designed to not so much to reduce the cost of the product as much as it was to reduce the purchasing and accounts payable infrastructure associated with procurement of low-value items. TQM: TQM or Total Quality Management programs were centered on improving the grade of the products purchases.
- The Current Account balance (X – M) – positive if in surplus, negative if in deficit
- Agricultural equipment
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- Annuities and other insurance products
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From a cost perspective, improving quality shall reduce Buyer’s costs that were associated with issues with Supplier’s quality. Early Supplier Involvement: The concept of early supplier involvement is to involve suppliers in the early stages of the design process to use their expertise. Supply Chain Management: The original goal of source-string management was to speed up the supply from suppliers to the customer to make companies and their suppliers more attentive to the Customer’s demand.
Supplier Performance Scorecards and Measurements: The easy fact is that unless there is measurement, reviews, goals, and rewards or penalties associated with performance, Suppliers won’t make the efforts to really improve, particularly if they aren’t the ones bearing the cost. To drive change requires that they feel the same pain the Buyer feels and these types of programs are made to manage continuous performance improvement to lessen the associated costs. Supplier Qualification: The concept of supplier qualification is for the provider to technically meet the criteria a product regarding pre-agreed variables. From a cost perspective, Supplier Qualification reduces the quantity of investment the customer must make in such qualifications. E-Procurement: There are a number of goals of E-Procurement.