Supply Chain – Strategic Cost Management leads to purchasing-driven profitability

To make a contribution to profitability the purchasing operation of a US manufacturing operation gained the support of senior management with a proposal that a 5% cut in a $5 billion purchasing budget would represent a contribution of $250 million. A Pareto Analysis was used to build a list of the top 20 categories which represented 80% of the total raw materials spend of $3 billion. Suppliers' actual costs and profitability were calculated by a detailed engineering analysis (raw materials, capi...

BPIR Categories

5.2.4 Purchase materials & supplies
11.1.4 Manage cash flow