How would you analyze and look for cost savings?

 

Question for Buyers :

If you started at a manufacturing company, one that hasn't historically been very good at data analyzation, and you wanted to not only get on track with analyzing all necessary information but also look for cost savings, how would you approach this?

I should add that the ERP system is archaic so most analyzation is performed in Excel.

What data would you want to see first?

What data would you deem absolutely necessary to track on an ongoing basis?

Where would you look for cost savings first (or second, third, etc)?

I have been a Buyer, or in a SCM role, for 15+ years total, and this is a situation I found myself in not long ago. While I feel confident in what I've done, and received positive feedback, I'd like to know how others would have tackled this. 


AIMDRIVE-AI Solution:

Once spend analysis is performed and major categories of spend are identified, we would engage in the following analysis for each major category first, then tackle the medium ones, etc. to identify if the prices and costs we currently incur are competitive: 

  1. Price Analysis: Look at benchmarks related to the price paid by other buyers for the same type of purchases we make.  The benchmarks can cover absolute prices as well as trend in price changes over time. This is sometimes sufficient to identify whether our prices are competitive or cost saving opportunities exist. 

  2. Cost Analysis: This is especially relevant and a must-do after Price analysis is performed, for purchases that are non-industry standard (purchases for which there is no industry benchmarks available because few companies buy these specifications). Cost analysis typically starts by developing a view of the average cost structure of products (or services) sold by the industry that we source from.  This can be used to compare to cost breakdown data requested from suppliers. It is also the foundation to build Should cost estimates that can be compared to the supplier-provided cost breakdowns (or to the price in case they have not provided a breakdown). This is the ultimate step to identify whether our prices are competitive or cost saving opportunities exist.

Use AIMDRIVE-AI (Free version available) to perform both types of analysis. 

Comments

Post a Comment

Popular posts from this blog

How can I reduce supply chain costs through better supplier management?

Image
Better supplier management is key to reducing supply chain costs. Here are some strategies: • Supplier Benchmarking : Compare supplier costs and performance to ensure you’re working with cost-effective and reliable partners.  • Collaborative Cost Management : Work closely with suppliers to identify cost-saving opportunities, such as process improvements or bulk purchasing.  • Negotiate Better Terms : Use data from price and cost analysis tools to negotiate better pricing, payment terms, and delivery schedules.  • Monitor Supplier Performance: Regularly evaluate supplier performance to ensure they meet quality, cost, and delivery standards. By leveraging AI-powered tools like AIMDRIVE-AI ( https://aimdrive.com/ ), businesses can perform price and cost analysis and engage in collaborative cost management with suppliers.   
Read more

What role does AI play in modern procurement software, and how does it improve decision-making?

Image
AI is reshaping the future of procurement by making processes more efficient, transparent, and data driven. Here’s how: · Cost Analysis : AI tools analyse cost structures and provide actionable insights for cost reduction. · Price Analysis : AI compares current prices with market averages and historical trends, helping businesses identify savings opportunities and negotiate better deals. By leveraging AI-powered tools like AIMDRIVE-AI ( https://aimdrive.com/ ), procurement teams can reduce costs and drive business growth in the supply chain.
Read more

Why is AI important in a supply chain?

Image
Artificial intelligence (AI) in supply chain management refers to the use of machine learning, data analytics, and automation to optimize various supply chain processes. For example AI helps reduce costs in supply chain by: • Cost Analysis & Optimization — Identifying cost drivers and providing real-time insights into cost breakdowns, driving data driven decision making. • Price Forecasting — Predicting future price trends based on historical data. • Supplier Benchmarking — Comparing supplier costs to ensure fair pricing. Tools like AIMDRIVE-AI simplify AI-driven cost analysis and procurement by automating cost breakdowns, tracking price trends, and providing actionable insights, helping businesses optimize their sourcing strategies and improve cost. 
Read more