--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---



NAPM InfoEdge
August 1999, Vol. 4 No. 12

Analyzing Costs for Various Purchases Members Only Content


For decades, the issue of true cost reduction was never fully addressed in either the private or public sectors. This was not due to a lack of interest in the subject, but was instead a product of the frustration faced by many purchasing and supply professionals as they battled the built-in economic barrier to cost reduction – inflation. Inflation, which gripped the country from the end of World War II until the nineties, was accepted as a way of life. It also provided a convenient excuse for simply passing increases in cost from supplier to purchaser through the channel of distribution which, in turn, obstructed attempts at cost reduction. Inflation was so omnipresent in the economy that a single organization had no significant influence over it. The increases became so endemic and unswerving in the economy that purchasers felt like Don Quixote tilting the windmills of ever-escalating prices. Prices rose, then wages rose to compensate and then prices rose to compensate for rising wages. The wage-price spiral appeared endless, reaching frightening levels in the late seventies and early eighties.

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