PURCHASING FOR SUPPLY CHAIN
TOPIC: COST REDUCTION IN PURCHASING
SUBMITTED TO: SEYED MOHAMMAD HOSSEINI
SUBMISSION DATE:6 MARCH 2023
SUBMITTED BY: GROUP 5
PRIYA 000898478
YUVRAJ BAJAJ 000896200
JACOB JOSEPH WILLIBALD 000899381
SATINDER SINGH 000899017
TARANJIT SINGH 000903418
TINTU THOMAS 000899516

Cost reduction in purchasing
Introduction
Cost reduction in purchasing mean save costs by using several techniques
without affecting the quality and by changing the operations while
purchasing
In a broader view, Cost reduction means financial savings achieved during
the purchasing process, but it comprises even more. Renegotiating contract
terms and conditions, streamlining administrative and operational processes,
and making wise use of data and technology are just a few ways to save
money.

Example
 Closing facilities, downsizing to a smaller office or moving to a
less expensive building or region, and lowering or eliminating
outside professional services, such as advertising agencies and
contractors, are just a few examples of cost-cutting techniques
that can be used.

METHODS OF COST REDUCTION IN
PURCHASING

OUTSOURCING OF ACTIVITIES
 A practise known as outsourcing involves delegating to specialised outside suppliers
non-essential procurement tasks or services.
 It works particularly well for indirect procurement categories like facilities
management, security, transportation, and logistics. The advantages of cost reduction
are
 1.Cheap internal resources are freed up by outsourcing low value/high volume
acquisitions.
 2.When there is minimal internal capacity or experience, access to global expertise and
market knowledge is possible.
 3.Specialists handle time-consuming contracting and negotiations.

CONTROL ON OPERATIONS
 By guaranteeing the optimal use of administrative resources, sound procurement
planning helps cut expenses. A lack of preparedness results in costly emergency
procurement measures and significant transportation costs.
 We can cut transaction costs and extra paperwork by optimizing internal P2P
operations, whether or not they are automated.

Engage with local suppliers
 Conduct market research
 Develop relationships with local suppliers
 Monitor supplier performance

Request supplier discounts
Request volume discounts
Build a strong relationship
Negotiate Better payment
terms

 Develop a training program
 Provide on-going education
 Encourage Cross functional collaboration
Educate and train staff

MAVERICK BUYING
 MONITOR PURCHASES
 ESTABLISH PROCUREMENT POLICIES AND PROCEDURES
 COMMUNICATE POLICIES AND PROCEDURES

QUALITY BUYING
 SUPPLIER EVALUATION
 IDENTIFY COST SAVING AREAS
 PRIORITIZE QUALITY OVER COST

UTILIZE TECHNOLOGY
 E-PROCUREMENT SYSTEMS
 SPEND ANALYSIS SOFTWARE
 ONLINE MARKET PLACES

CHANGES IN CONTRACTS
 There is probably room to review certain pricing
that has become anti-competitive, as well as the
terms of payment. You may be able to receive
bulk savings by talking to your suppliers about
possible adjustments to your purchasing
frequency.

Use economies of scale
 Costs are increased across your supply chain by
small, repetitive orders. By centralizing the
purchasing process across all locations and
departments, you can benefit from bulk savings
and reduce your per-unit cost.

Seek discounts from the supplier
 Despite the fact that it can seem elementary, doing so can
actually save your procurement costs rather significantly
and is one of the simplest strategies to do so. It becomes
simpler when you make frequent purchases from a select
group of merchants and develop a strong rapport with
them; this gives you more negotiating power. Talk to them
about a price; you might offer early payment or larger
orders.

BENEFITS
 IMPROVED CASH FLOW
 INCREASED PROFITABILITY
 IMPROVED CUSTOMER SATISFACTION
 MORE SUSTAINABLE OPERATIONS

ADVANTAGES
 LOWER COSTS
 COMPETITIVE ADVANTAGES
 IMPROVED EFFICIENCY
 BETTER SUPPLIER RELATIONSHIPS

CONCLUSION
 In conclusion, cost reduction in purchasing can be an effective way for
companies to improve their financial position, competitiveness, and operational
efficiency. By reducing costs, companies can increase profitability, improve
cash flow, and offer more competitive prices to customers. Cost reduction
efforts can also lead to better supplier relationships, more sustainable
operations, and increased innovation.

References
 https://sievo.com/blog/cost-savings-strategies-for-procurement
 https://limitlesstechnology.com/benefits-cost-reduction-vendor-
management-solutions/
 https://www.order.co/blog/procurement/procurement-cost/
 https://una.com/resources/guide/cost-reduction-strategies-in-procurement/
 https://www.researchgate.net/publication/238327434_Business-to-
business_e-procurement_Success_factors_and_challenges_to_implementation