Cost reduction strategies                              
             
procurement and logistics
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COST REDUCTION IDEAS  - PROCUREMENT AND LOGISTICS
.

The companies which have  greater geographical  presence or are multilocattional can  achieve better price by
buying bigger volumes  instead of buying for individual units. Central buying policies are recommended for such unit
.

Bulk buying results in  annual contracts for a period of six - twelve months for entire year requirement with prices
being finalised  for the entire period .






Most of the commodities  and raw material  has seasonal  cycle  of prices  as they peak and fall in intervals .Hence
we can book maximum amount of our requirement  when prices are low .





Vendors should be located  in close vicinity of company  which helps in keeping low inventory as well as low freight
cost .






It  is highly recommended  to have  partnership  with vendors  in either having equity or technical collaboration so as
to pass on savings to cost reduction in manufacturing cost.





Putting up tenders and requirement  on internet  and setting up auction for  requirement on web  which helps in
reaching out more numbers of  vendor base . This  also helps in cutting cost  when we opt for conventional  way of
asking tender /quotation . Most popular  way of procurement strategy is reverse auction , where the lowest price
bidder takes away the order .






In several countries the federal/ State govts provide  tax heavens for manufactures for certain period say 10- 15
years .Hence buying from these area s helps in cutting cost .In common parlance it is called TAX HOLIDAYS . Look
out for such places prior to placing orders.




Select high cost items  and replaced it by  some  low cost material . eg ; steel by plastic/aluminium .


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