A cost reduction programme usually starts with a clean spreadsheet and an ambitious target. A year later, little of what was in the spreadsheet has often reached the result. The pattern behind this is well studied — and it has little to do with the original idea.
Read the article – Why a cost reduction programme can no longer be felt after twelve monthsA negotiation is closed, the new price is written into the contract, and the saving is entered in the presentation. Whether it actually arrives in the result is decided only afterwards — and that is where it is most often lost.
Read the article – The difference between a saving on paper and a saving in the resultsA third round of price talks with the same supplier rarely delivers much more. If costs still won't come down, the problem usually no longer sits in the price, but in the specification and the process that created that price in the first place.
Read the article – How to recognise that the problem is the process, not the priceMost price negotiations with suppliers follow the same pattern: a comparison of quotes, a reference to a cheaper competitor, a discount. If you know the supplier's cost structure beforehand, you negotiate with figures instead of pressure — and get considerably more out of it.
Read the article – What to check in the cost structure before a supplier negotiationBefore a price is negotiated, a company first has to know what it actually depends on. A recent survey shows that this basic groundwork is still missing in many mid-sized purchasing departments.
Read the article – How a mid-sized business prepares for a purchasing negotiationA saving is not lost on the day it is decided, but in the months afterwards — at the points in the org chart where nobody alone is responsible. Fixing that is not a question of saving more, but of assigning ownership differently.
Read the article – What has to change in the organisation for a saving to hold