The cost management program strategy for purchasing section is at the core of the supply management leader's role. To find a seat at the Chief Officer table the Supply Leader must be able to understand not only the costs in terms of dollar terms but be able to hold her/his own in discussions with the CFO (Chief Financial Officer). For earlier posts on this Section 1-B-2 scroll down. It has 9 sub-sections some of which you are very likely to have dealt with in your jobs.
It is very likely that you have dealt with the question of "total cost of ownership" which includes the purchasing cost, installation cost, service cost and disposal cost. If your organization is strong on sustainability the disposal cost, mode and impact on environment can be an important consideration. Thus if two vendors provide comparable total cost solutions but one has a better sustainability element - you might decide to go for the more sustainable solution.
Included in this section are the concepts of value analysis and value engineering that are sometimes used interchangeably. However, value analysis is about studying existing processes and products relevant to what you are purchasing. For example, value analysis for the purchase of a low value bottle-neck item might reveal that the processes of purchasing sometimes can hold up production. Here, it might be better to just have approved vendors and allow shop floor managers to buy items using a fixed value P-Card.
On the other hand value engineering is connected with the development stage of the new product and innovation process. Here when you are turning a concept into prototype, value engineering can be useful. Thus the development team for a machine might consider a design that allows for easy access inside a machine for servicing and save service costs down the line when the machine is installed at a customer. Such value engineering at the design stage can greatly help in cost management.
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