Understanding which type of expenditure you are dealing with — acquisition, critical, leverage, or strategic — is very important. Based on that, supply managers will determine where they can focus their efforts for improvement. For example, as detailed earlier, leverage purchases are a prime candidate for cost reduction focus; strategic purchases can focus on cost reduction, innovation, and new activities that will create value. In most instances, the supply manager will perform a cost analysis of a suppliers cost and learn about the suppliers operations in order to look for ways to improve. The supplier site visit allows the purchasing organization to obtain much of this information and further validate conclusions that it may have come to based on other research.
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