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Avoid Overpaying for Your Outsourced Parts

Leverage detailed should-cost information to help reduce costs

Sourcing and supply chain professionals face tremendous pressures. With hundreds or even thousands of parts, multiple suppliers, quality requirements, and tight deadlines, it is difficult to truly know whether they are getting the best deal on every single part.

 

Fortunately, innovative new software solutions make it possible for sourcing professionals to ensure consistently optimal pricing for all their outsourced parts and products.

Do You Face These Challenges Negotiating with Your Supply Chain?

Cost Information
Lack of detailed manufacturing and cost information before the bidding process begins for new or mature parts
Manufacturability
Inefficient communication with suppliers around product manufacturability issues
Production Standards
Inability to reach consensus with suppliers on production standards, labor, and overhead costs

What if You Could:

  • Cost-analyze a greater number of parts, faster?
  • Identify parts for which you may be overpaying that have the greatest cost savings opportunities?
  • Identify parts that could be re-routed through a different manufacturing process for additional cost savings?
  • Identify parts that could be re-designed for even more cost savings?

“With aPriori we are able to provide professional and detailed cost data when negotiating with suppliers to get cost savings and improve product profitability and product leadership.”

Manufacturing/Test Engineer
Large Enterprise Consumer Products Company

Achieve Cost Reduction Goals

Product cost management software helps sourcing teams overcome the time and information obstacles and achieve significant product cost savings. How? Through real-time, detailed product cost information. With aPriori, sourcing professionals always know how much a part or product should cost to produce. Access to detailed “should-cost” information enables sourcing experts to easily identify where they are overpaying for outsourced parts and to better negotiate with suppliers. The result is significant product cost savings en route to meeting (or surpassing) cost reduction goals.

“In just one cost reduction project that I used aPriori extensively, we reduced the cost of the part at a supplier enough to create an annual reduction that will pay for my aPriori license for 5 years.”

Cost Engineer
Global 500 Industrial Manufacturing Company

Quickly Identify Cost Outliers

A product cost management platform helps strategic sourcing teams more quickly and easily identify parts with the greatest potential for significant savings. Although you can identify potential cost-saving opportunities manually, a product cost management software tool can analyze a greater number of parts faster and use more sophisticated filters. The key to this outlier analysis is knowing what it should cost to manufacture the parts in question so you can compare that amount with the price currently being paid and quickly identify the parts that are out of line.

 

aPriori provides that “should-cost” knowledge and enables you to identify cost-saving opportunities in three primary areas:

Sourcing Opportunities

Determine which parts are out of the “cost norm” by comparing “should cost” to the current or quoted price. The resulting list of parts become candidates for re-quote or re-bid.

Manufacturing Opportunities

Evaluate current designs to determine if there is a more efficient, lower cost method to manufacture them. Re-routing production parts through a less-expensive manufacturing process.

Re-Design Opportunities

Identify parts which may not be designed as efficiently as possible and therefore result in higher costs. Parts that appear out of the “cost norm” become candidates for re-design.

Engage Suppliers in Fact-Based Negotiations

Product cost management technology takes the guess work out of the supplier negotiation process by providing a complete breakdown of part cost information, such as material costs, labor costs, overhead costs, tooling investments, manufacturing process costs, etc., so you can understand how the manufacturing cost is calculated.

 

During fact-based negotiations, this detailed component cost information guides discussions with your supplier, helping you focus on the biggest gaps between your data and theirs and ensuring that you purchase each part at a fair price, that you’re not overspending for the part, and that your suppliers are not losing money. This is a much more effective strategy than saying “your price is too high” or “I want a 10% reduction in costs.”

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“With aPriori, we are able to discuss costs with suppliers and negotiate with facts rather than just saying ‘you are too high.’”

Design Cost Engineer
Large Enterprise Industrial Manufacturing Company

Avoid Overpaying for Outsourced Parts

With few sourcing personnel, complex dynamics and grueling deadline pressures, it is nearly impossible for companies to know if they are paying the best possible price on every one of their outsourced parts. While this deficiency has been tolerated in the past, the constant pressure on corporate performance, combined with increasing material and energy costs, is forcing product companies to pay closer attention to what they are paying external suppliers to make their parts. Fortunately for sourcing experts, innovative software solutions are making it possible for them to ensure consistently optimal pricing for all their outsourced parts and products.

 

Download this whitepaper to learn how a product cost management platform that generates detailed should-cost estimates and determines the most efficient manufacturing process to produce a part can help you:

 

  • Identify overpriced parts
  • Negotiate optimal pricing
  • Validate supplier quote
  • Achieve cost-reduction goals

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Whitepaper Download

Are You Overpaying for Your Outsourced Parts?

Additional Resources

video

CIRCOR LEVERAGES SHOULD-COST DATA TO TRANSFORM PRODUCT FROM UNDERWATER TO MARGIN POSITIVE

ebook

IMPLEMENTING AN EFFECTIVE PRODUCT COST MANAGEMENT PROGRAM

webinar

CONDUCTING YOUR OWN SPEND ANALYSIS

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