Saturday 12 January 2019

Cost Management - Discounts, Negotiation

Cost Management


Cost Management

Many supply manager believes they are not allowed to go too far in the supplier. They took that position for several reasons, namely:
  • In many cases, the supplier does not know their costs, and will not be useful asking them about it;
  • Interpretation of cost calls for an exercise in determination, and differences of opinion will be increased if all figures have been available;
  • Many suppliers will not divulge confidential information costs;
  • The cost of the seller will not determine market prices;
  • The buyer will not be drawn into the cost of the supplier again.
  • The Total Cost of Ownership

The buyer should estimate the total cost of ownership (TCO) before selecting a supplier. Broadly, understanding TCO for acquisition of non-capital goods includes all relevant costs, such as administration, follow-up, expediting, inbound transportation, inspection and testing, rework, scrap, storage, warranty, service, downtime, customer return, and lost sales. The acquisition price plus all associated costs into the total cost of ownership. TCO can be used as a number of reasons that are allowed:
  • To mark the occasion cost reduction;
  • The assist in the selection and evaluation of suppliers;
  • Provide data for the negotiations;
  • To focus on supplier cost reduction;
  • The mark the profits from overpriced, high quality items;
  • A clarify and define the expectations of the performance of the supplier;
  • To create a perspective of long-term supply; and
  • The predict future performance.

Target Pricing

Target pricing focuses attention on everyone in the Organization in designing the cost of products than in the production cost of eliminating the case. Target pricing yield reduction of company kos extensively, in (1) designing for a fee, in part design engineering; (2) to the cost of manufacturing, in part of the production; and (3) the purchase for a fee, in the part of the supply.

The Learning Curve or Manufacturing Progress Function

Learning curve provides an analytical framework for quantifying the principle of recognition in General that a person will be more qualified by experience.

Activity-Based Costing

calculations of the cost of traditional shows disruption in financing products because of the way it allocates overhead in the basis of direct labor. In the past, when labor costs often become the most cost categories, this allocation is made by the estimate. However, the cost of materials has overcome labor costs as the single biggest cost factor, the accountant can see other ways to mengalokai overhead. Basically, activity-based costing (ABC) is trying to change the indirect costs to direct costs with cost drivers undergo behind indirect costs.


Cash Discount

Cash Discount given by any buyer of virtual goods, industrial, though the actual discount rate becomes a matter of custom individual trade and change from one industry to another. The purpose of the cash discount was to secure immediate payments from an account.

Trade Discounts

Trade Discounts given by manufacturing to the buyer because the buyer is a distributor or user type. Generally, they aim to protect distributors make it more profitable to a buyer to purchase from the distributors rather than directly from the manufacture.

Multiple Discounts

at many industry and sales, the price of quota in a basic multiple discounts. For example, 10, 10, and 10 means that an item is listed at $100, the actual price to be paid is the buyer ($100 – 10%) $100%(– 10 – 10%)-$ 100%(10 – 10%) = $72.90.

Quantity Discounts

Quantity discounts are given on purchases of a certain quantity in and forcibly changing the proportions of the amount purchased.

Quantity Discounts and Source Selection

Question quantity discounts is flowers for many shoppers on the second reason: all quantity discounts, and especially the cumulative type, limits the number of supplier, thus have an impact on the choice of source.

Cumulative Volume Discounts

another type of quantity discounts are cumulative and varies in proportion to the quantity of purchase; but, instead to be computing in the size of the order being placed at any one time, is based on the quantity of purchases through a period of time. Discounts are usually given as a sustainable protection of incentives.


The negotiation is the longest and most expensive of pricing. Negotiations require the buyer and supplier, through discussion, which make general agreement in the contract of buying/selling is important, such as delivery, specifications, warranty, pricing, and approval.

  • Negotiation Strategy and Practice
  • of reasonable negotiations is the expectations of buyers and sellers. This has to be a limit to reason from the negotiations to assert unequivocally that the supplier:
  • Operates in an efficient behavior.
  • Maintain a balanced price and costs.
  • Not taking advantage of a privileged position.
  • Make proper and reasonable adjustment of claims.
  • Become a provider to responding to the special needs of the buyer.

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