We have 15 years of data that shows that buyers who move from price-focused, competitive purchasing to cost/value-focused, collaborative purchasing can achieve savings of 8-18% (see figure). I wish we had a similar level of data on the career progression experienced by buyers who develop cost knowledge and utilize it in a collaborative way. I…
Last week we blogged about the reasons why buyers should use should-be cost models. In summary, effective should-be deployment needs to be designed with the following objectives to maximize success: Reduce buyer workload Make cost negotiations easier Help achieve lower cost designs Improve career prospects for buyers Even when the application of should-be cost models…
In a recent round table we conducted with Chief Purchasing Officers, CPO’s were lamenting about the difficulty they encounter in getting buyers to develop and use should-be cost models. They were looking for the magic dust that would make buyers as enthusiastic about should-be models as they were.
Our blog “If Value Matters, Why Am I Measured on Cost?” always gets a lot of interaction from purchasing managers who believe that performance metrics that focus on PO to PO price reductions do not show the value that purchasing is providing their companies. Here is a thought. Instead of waiting on the CEO’s and…
For the past few years I have participated in career development academies for a couple of industry associations by doing a short negotiation primer. The facilitator for the sessions always leads off with an exercise he likes. The exercise assigns the trainees into groups A, B and C and gives Group A the most negotiation…
Buyers rely on cost breakdown analysis to reduce material costs and ensure competitive pricing on purchased components. However, the ability to impact costs is directly correlated with the usefulness of the data collected from suppliers. A well-designed detailed cost breakdown is the foundation of highly effective cost breakdown analysis. Well-designed detailed cost breakdowns reflect the…
Whether you have been using price models for years or are new to cost modeling, this short video will provide you with a great look at the basics of linear pricing models.