Cost & Price Strategies
Supply Chain Cost Identification and Reduction Strategies
This session examines many costs purchasing and supply management should consider — both within our organizations and at suppliers. Issues include how costs are determined, how overhead costs are assigned to products and services, how budgets are determined, and how cost savings can be gained which are real and lasting. We will examine how to calculate different types of cost and how to evaluate suppliers based on their total cost to us.
There are also costs incurred within our organization based on how work is done. When streamlining internal operations or having suppliers do portions of the work for us, an understanding of how to cost processes is essential. The principles are equally appropriate to a service environment or a manufacturing environment.
You Will Learn
After participating in the course, you will be able to:
- Understand the principles of activity-based cost management (ABC)
- Use ABC tools to identify and manage supply chain costs more effectively
- Determine the cost of a process and the savings from process simplification
- Identify appropriate factors to include in total cost of ownership (TCO)
- Create a total cost management strategy uniquely applicable to your situation
- Implement your total cost management plan within your organization
- Strategic cost management — identify major opportunities and issues; Current financial accounting systems versus Activity-Based Costing systems; Political issues associated with financial reporting
- Activity-Based cost management (ABC) — its relevance to supply chain management; Defining ABC and its application to processes, products and functional operations; Using ABC to drive cost reduction, performance improvement and process simplification; Hands-on examples
- Total Cost of Ownership (TCO) — its scope and applications; Developing a successful approach to TCO; Identifying appropriate factors to include and how to measure them; Hands-on examples
- Developing a TCO system; Identifying the scope and participants; Enlisting participation and support from key areas; Evaluating TCO models; Applying TCO to services as well as materials purchases; Choosing the right model for your application
- Lessons learned; Barriers to anticipate and prepare for; Supplier cost disclosure; Developing an action plan for your organization.
A portion of the seminar is devoted to assisting you formulate a total cost picture applicable to your specific situation. To enhance the value of the workshop to you, please bring a calculator and the following information with you:
- The cost issues you would most like to discuss
- How you currently evaluate suppliers
- The cost of carrying inventory in your organization
- Have you calculated the cost of a purchase order? What is it?
- If you purchase internationally, the factors you include in your evaluation.