Price/Cost Analysis in Tough Economic Times

摘要

A severe economic recession (no politician would dare call it a depression) affords supply managers the opportunity and even the necessity to work with suppliers to evaluate all elements of cost, both direct and indirect to uncover methods of cost reduction for each side. Price analysis is comparatively quick, easy and inexpensive, although it yields little beyond a comparison of prices offered by suppliers in a specific moment. While the richness of information may be lacking, this sort of analysis is typically useful for industry standard products where there are competitive markets. Cost analysis takes time and is much more detailed, thus yielding substantially more information for supply managers. Decomposing price into its elements is a more expensive process than price analysis alone, but exposing areas of unnecessary cost allows both sides to benefit. Both of the above methodologies focus on the cost of materials or services. Another category of cost must not be overlooked: administrative costs. Saving administrative cost is every bit as valuable to an organization as saving material or service costs, although this category is often ignored. Each of these categories will be evaluated during the Conference presentation.