COST REDUCTION IDEAS - PROCUREMENT AND LOGISTICS .
BULK BUYING
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 .
OPPORTUNITY BUYING
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 .
LOCAL VENDORS .
Vendors should be located in close vicinity of company which helps in keeping low inventory as well as low freight cost .
PARTERNERSHIPS WITH MAJOR VENDORS
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.
E PROCUREMENT
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 .
BUYING MATERIAL FROM TAX EXEMPTED AREA .
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.
ALTERNATE MATERIAL
Select high cost items and replaced it by some low cost material . eg ; steel by plastic/aluminium .