Cost reduction strategies
procurement and logistics
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Wherever possible buy directly from manufacturers /authorised dealers /OEM not from any
agent /dealer or commission agent . Lesser the intermediaries lower the rate .
Look out for non branded items for non - critical areas as branded items has premium attached
to it .Some times you can get good items which are non - branded just in case of garments.
All items come into some form of secondary packaging and out of which some of the items can
be resued or recycled .
Ask vendors to reuse /recycle packing items . eg cans , sacks , bottles , cores trays and pallets
etc .
Buying primary material then giving it to processor instead of buying directly from the
convertor , it helps in two ways as we can avail modvat exemption on the raw material and can
eleminate the premium on conversion eg
Kraft paper for cbbs .
Few items can be made in house rather getting it from outside eg grounded sugar , cashew nuts
etc .
The price should always be negotiated with all information available . Prices are when you are
informed and aware of options available .Always check prices with alternate sources .
- ECONOMICAL ORDER QUANTITY ( EOQ )
This is the maximum qty of item which you can place to an vendor taking into account the
frequency of items used .
It helps in reducing inventory cost .
By eliminating inspection at factory and asking vendors to provide materials as per standards and
completing inspections at their end we can eliminate delays and manpower used in these kind of
activities .
Segregation of scrap generated in a manufacturing unit is important .It has been observed that
all scrap are sold
as lot to scrap merchant who in turn segregates it in different categories and sells it in at
higher rates .
COST REDUCTION IDEAS - PROCUREMENT