As a buyer or a seller, one of the most difficult negotiations is a price increase request.  Despite the difficulty, there appears to be a lot of it going on in the marketplace.  Whichever side of the negotiation table you are on, we are seeing success from the side that outperforms the other in two key aspects of negotiation:  Preparation  Active Listening  Preparation – Successful negotiations are built upon Preparation, Power and Aspiration.  Preparation is the most important because … [Read more...]

Cost models provide buyers with valuable benchmarks to validate supplier pricing. Used effectively, they help drive optimal design, reduce the time required to bring products to market and help companies succeed. When it comes to understanding supplier cost structures, I admit that I am biased. After all, understanding supplier cost structures was what started my career in procurement. Ford Motor Company sold me on the idea. In 1984, the country was emerging from a recession after a long … [Read more...]

The global economy is undergoing a Digital Transformation at record pace.  Declining costs in bandwidth, storage and computing enable organizations to optimize, connect and model data to improve decision making and to drive results. Whatever the experts call it:  Industry 4.0, Digital Economy, Internet of Things, Harnessing the Power of Artificial Intelligence and Machine Learning – its potential can help purchasing organizations ensure that they are buying at optimal cost levels, from … [Read more...]

In whack-a-mole a person hits the mole forcing it down only to have it pop right back up in another location.  In quotation whack-a-mole buyers push on an area of supplier costs to get pricing to go down only to have costs pop-up in another area bringing prices up as well.  Buyer and suppliers continue this game through multiple rounds of quotes on each piece of business to be awarded. So, what is the alternative?  We recommend that buyers stop playing the game altogether and instead … [Read more...]

Expectations are that hard hit manufacturing sectors will see improving revenues in 2021, although how quickly improvements will come is greatly dependent on the world’s ability to rebound from the ongoing covid surge.  With little control over revenue growth amid a global pandemic, company leaders are looking to their purchasing teams to aggressively drive cost savings. Manufacturers looking to aggressively drive cost savings should: Take a deep breath before cutting purchasing … [Read more...]

Over the past 16 years we have looked at hundreds of commodity strategies. Most often the strategies are contained in long PowerPoint presentations designed to demonstrate how well the supply base is aligned with the company’s long-term strategies. Almost all provide good analysis of the size, shape and form of the supply base that is required to support their company’s future demand requirements. Most identify the expectations suppliers need to meet in support of quality, technology and … [Read more...]

   Attend our New Cost Management Certification Program  - a 4 Month Development Program for new buyers seeking essential skills and experienced buyers seeking cutting edge techniques to success Click Here to Download our Brochure I have always thought that good buyers transition into good managers and finally good leaders.  What characteristics do good buyers have that make them good leaders?  Here are a few: They ask good questions. “Judge a man by his questions … [Read more...]

Purchasing success cannot be achieved by purchasing organizations or individual buyers without cost success. But what is cost success? One of the best purchasing leaders in the manufacturing industry explained it to us this way: “The best purchasing organizations and buyers can answer these questions: What does it cost? What should it cost? What is the plan to close the gap?” He was right…whether they are doing it consciously or not, almost all buyers and purchasing … [Read more...]

We have 15 years of data that shows that buyers who move from price-focused, competitive purchasing to cost/value-focused, collaborative purchasing can achieve savings of 8-18% (see figure). I wish we had a similar level of data on the career progression experienced by buyers who develop cost knowledge and utilize it in a collaborative way.   I think it would be revealing. It has been my experience that buyers who develop a deeper understanding of cost also increase their knowledge of … [Read more...]