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Cost savings Methods
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· Increase volume of scope.
· Negotiation - Ex: hire a professional negotiator for big contracts..
· Unit cost benchmarking:
· Outsourcing:
· TCO- Total Cost of Ownership :
· Increasing supplier competition: Mở tender, bidding
· Standardize , Re design to cost.
· Process automation: vd: e-tender/bidding
· Operational optimization: Ex: Discuss with supply chain, find opportunities to optimize operations.
· Reduce inventory: ex: VMI – Vendor-managed inventory
· Cash improvement for example:
o credit extend (improve payment term)
o Value improvement (Ex: revenue from spare parts disposal,...)
· Supply Agreement: Rebate
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· Increase volume of scope
· Standard price lists & sourcing new suppliers
· Identify standard cost
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· Tìm nhiều NCC/ Increase supplier competition
· Reduce Breakdown cost
· Improving Relationship with suppliers
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Cost Saving Measurements
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· (Last year price – current price) x volume
· (Budget price ( based on market intelligence)– current price) x volume
· Budge price/ actual price
· New items :
o (average bid price – contract price.) x volume.
o Cheapest price bid in the 1st round – ordered price
· Plausible price (giá có vẻ hợp lý- sử dụng phương pháp tách giá, open book, offering scheme- so sánh giá dịch vụ phức tạp) - ordered price
· Composite price (cân nhắc giá hơp lý, giá tốt nhất ngoài thị trường)– ordered price
· ( price this year- price last year)/old price
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· Fix saving amount per year: For example: 80,000$ per year for cost saving
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· % Cost saving = (Budget - Price)/Budget; Tùy thời điểm
· Compare with last year price
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Challenges
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· Business strategy (confidential to purchasers…)
· Rule 80/20
· Internal process is not clear.
· Collaboration with operation team/finance team; Internal conflict (Sales forecast, Finance, End user , Management,… )
· Market intelligence / market risk:
o Risk market increase more than estimation (Raw material price increasing.)
· Competence + capability negotiation skill of purchasing team:
o Purchase qualification.( scope of work, market knowledge )
· Lack of Support from management
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· Actual business demand cannot increase to the minimum volume for better contract with suppliers
· Not much support from purchasers of other subsidiaries
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· Lack of database: Market; Product;
· Market price increasing
· Lack of historical data, market intelligence
· Suppliers reject to give Quotation
· Abilities of purchaser
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Suggestions to overcome challenges
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· Benchmark 3 years latest historical and estimate
· Planning tools annually from internal
· Internal collaboration, internal stake-holder engagement (Understand others function + involve stake holder on board)
· Right person/ right sources
· Training
· Standardize process.
· Decentralized person (insurance, real estate,…) (expert)
· Learning from supplier + learning from sale + learning from supply chain network + market analysis + industry analysis + supplier relationship
· Learning Purchasing skill from CBAM
· Involve purchasing strategy as a part of business strategy
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· Convince other subsidiaries within the group to use the same suppliers
· Long-term contract with suppliers
· Stable order within quantity commitment
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· Use software; setup database;
· Tạo Thư viện Price list
· Evaluate suppliers: Technical and Commercial
· SPC group
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