The best purchasing manages have long recognized that there is value to be taped throughout the life of the contract. Many have adopted continuous cost elimination programs to capture this value. The most successful have the following characteristics:

Both supplier and buyer are responsible for identified opportunities.

Sessions are pre-established on a quarterly basis.

Meetings cover both performance for the past quarter and plans for future improvements.

Short and long term opportunities are identified.

Improvements that reduce expenses anywhere in the total life cycle chain are welcome.

Successful implementation of cost reductions are used as a selection criteria for future contracts.

The benefits accrue to both buyer and supplier.

If you do not routinely incorporate cost elimination requirements with your contracts, give it a try. You will likely find savings and a much more productive relationship with your suppliers.

Best Practice | Case Study | Commentary

April 5, 2000
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