The effectiveness of each approach varies from company to company, and there is no priority for the following nine methods. 1.Value Engineering (VE).The function of the product or service is studied, and the cost is achieved by eliminating, simplifying, changing, and replacing the lowest life cycle cost. Value analysis is used in the engineering phase of new products. Value engineering, on the other hand, is a systematic study and analysis of the functional cost of existing products, but now value analysis and value engineering are regarded as the same concept. 2.negotiationNegotiation is a process in which buyers and sellers reach mutual agreement on their respective goals, which is also the most basic ability that procurement personnel should have. Negotiation is not limited to the first aspect, but also applies to some specific needs, using the negotiation method, it is generally expected to achieve a reduction of about 3 5%. If you want to achieve a larger reduction, you need to use methods such as cost analysis, value analysis and value engineering (VAVE). 3.TargetCostingManagement guru Peter F. DruckerIn the article Five Deadly Business Sins, Drucker mentions that the third fatal fault of a company is that pricing is cost-driven pricing. Most U.S. companies, and almost all European companies, formulate their products in terms of cost plus profit margins. However, as soon as they bring the product to market, they have to start cutting back, redesigning products that cost too much, and incurring losses, and they often have to abandon a good product because it is incorrect. The research and development of the product should be based on the premise that the market is willing to pay, so it is necessary to assume the listing price of the competitor's product before formulating the company's product. The old cost-driven mindset of pricing has made the electronics industry in the United States no longer exist: Toyota and Nissan have squeezed German luxury cars out of the American market as a result of price-driven costing.
4.Early Supplier Involvement (ESI).
This is in the early stage of product design, and the first business with a partner relationship is selected to participate in the new product development team. Through the participation of early suppliers, the new product development team puts forward performance specifications and requirements for suppliers, and uses the expertise of manufacturers to achieve the purpose of reducing costs. 5.Leveraging PurchasesThe demand of various public institutions or different departments is carried out in a way that concentrates on expanding the amount of procurement and increasing the bargaining space. Avoid their own procurement, resulting in different institutions in the organization, from the same business to purchase the same parts, but the first is different, but do not know each other, the opportunity to save procurement costs is lost. 6.Consortium PurchasingProcurement that occurs mainly in non-profit undertakings, such as hospitals, schools, etc., by consolidating the needs of different purchasing organizations to obtain better volume discounts**. This is also being applied to general business activities, with the emergence of new industries such as third-party purchasing, which is dedicated to serving companies that do not have a high demand for MROs. 7.DesignFor Purchase (DFP).The strategy of making or buying, in the design stage of the product, using the standard manufacturing processes and technologies of the third party, as well as the use of industry-standard parts, to facilitate the availability of raw materials, not only greatly reduces the technical support required for self-production, but also reduces the cost of production. 8.Cost and Price AnalysisThis is the basic tool of professional procurement, understand the basic elements of the cost structure, it is very important for the purchaser, if the procurement does not understand the cost structure of the items bought, it can not be regarded as understanding whether the items bought are fair and reasonable**, but also will lose many opportunities to reduce procurement costs. 9.standardizationImplement the standardization of specifications, use common design specifications for different product items, fixtures or parts, or reduce the number of customized items, so as to achieve economies of scale and reduce manufacturing costs. However, this is only one part of the standardisation process, and organizations should expand the scope of standardization to include operating procedures and processes to achieve greater benefits. How should you choose the above cost reduction methods, and when formulating a procurement strategy, you should consider the following procurement-related situations at the same time. 1.The type of product or service purchased. 2.The stage of the life cycle of the product. 3.Annual demand and total annual purchases. 4.Relationship with ** business.
First of all,The type of product or service purchased. It is a one-time purchase or an ongoing purchase.
This should be the most basic understanding of procurement, if the type of procurement has changed, the strategy must also be adjusted, continuous procurement on the cost analysis requirements are much higher than one-time purchases, but if the amount of one-time purchases is quite large, can not ignore the effectiveness of its cost savings. Next,What is the annual demand and the total annual purchase amount, which is related to whether you can get a better bargaining advantage when negotiating with **. ButThe purchase volume is directly related to the stage of the product life cycleIn the process of product introduction period, growth period to maturity period, the purchase volume will gradually expand, and the purchase volume will gradually shrink until the recession period appears. Taking the 3C industry as an example, it is very obvious that the product life cycle has a tendency to gradually shorten. Finally,It is the relationship with the ** businessFrom the seller, the traditional businessman, the recognized businessman, to maintain the partnership relationship with the businessman, and then form a strategic alliance, the way of sharing cost information is also different. If the relationship with the first business is ordinary, generally speaking, it is not easy to obtain detailed cost agency information, only with the first business to maintain a closer relationship, mutual trust and cooperation, there is a way to do.