8 Strategic Levers to Reduce Procurement Cost

Selecting and implementing procurement measures is a vital part of a holistic approach to strategic procurement.

Working continuously, systematically and fact-based with your procurement costs is crucial to realize savings and improve profitability.

In order to implement procurement measures, it is important to understand the underlying cost drivers. The following method may be appropriate for analyzing cost drivers, where the total cost is a function of:

Note that the measures, or levers, can affect several cost drivers simultaneously, due to linkages and interrelationships. For example, a tender process can result in lower unit prices, as well as product standardization based on input from suppliers during the process.

The eight levers are divided into two groups; commercial and process. Below we have listed some typical characteristics and key assessment factors for the various measures.

2. Tender process

3. Bundling

4. Optimize specifications

5. Reduce consumption

6. Redefine the supply chain

7. Insourcing/outsourcing (make-or-buy decisions)

8. Strategic partnerships

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