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Index >> Procurement Skills Development >> Sustaining Cost Reduction: 36 Quick Tips

Sustaining Cost Reduction: 36 Quick Tips
By Daniel Fielding

Here are 36 ideas about where we can look to take cost out. They might not be at all relevant to every purchase but the more stones that are looked under, the more likely we will find something that impacts upon cost. It may that one of these ideas is a winner but it is more likely that several ideas will impact up on costs cumulatively.

Demand Management
1. Can we reduce unnecessary consumption?
2. Can we reduce legitimate consumption?
3. Can we use more and increase our scale?

Specification
4. Can we adopt standard or market specification?
5. Can we reduce any over-specification?
6. Can we improve quality if it reduces consumption?
7. Can we substitute something else at lower cost?
8. Can we find an alternative solution to the business need?


Contract Terms
9. Can we reduce onerous sanction on the supplier?
10. Should we transfer less risk to the supplier?
11. Can we extend the duration of the agreement?
12. Can we incentivize the supplier to cut costs?
13. Can we pay more (or less) quickly?

Linking Contracts
14. Can we bundle this contract with others?
15. Can we unbundle this elements and contract with a stronger market?

Supply Base Optimisation
16. Can we consolidate volume on one source?
17. Can we add new suppliers to increase competition?
18. Can we source new suppliers?

Purchase Method
19. Can we stimulate competition by RFP or bid?
20. Can we change our negotiation strategy with the vendor?
21. Can we cooperate with the supplier?

Time
22. Can we reduce the time taken in the processes?
23. Can we synchronise contract periods?
24. Can we change the timing of when we approach the market to take account of market cycles?

Policies
25. Do our internal policies drive up cost?
26. What is the cost penalty of supplier adherence?

Geography
27. Can we shorten movements of material or personnel?
28. Can we arrange freight or logistics ourselves?

Control Levels
29. Can we increase the amount of supervision?
30. Can we reduce the amount of control?

Skills
31. Can we use more skill in the process to shorten time or reduce rework?
32. Can we simplify the process and use less skilled labour?

Supply Chain Integration
33. Can we link our processes with those of the supplier?
34. Can we forecast demand more accurately?
35. Can we forecast demand over a longer time horizon?
36. Can we involve the supplier earlier in the process?

Each of these tips in isolation may contribute a small saving. But in our experience, joining with the supplier to explore how we can take cost our can deliver significant results. And while the nature of the ideas generated may change, it may be that the scale of improvement does not diminish through time.
When Lee Travino had problems with his putting on the green, he initially attributed this to bad luck. But then he practiced and practiced and ¡Kpracticed. He quipped ¡§ The more I practiced, the luckier I became!¡¨ So keep looking for those opportunities ¡V you might just get lucky!






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