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Training Services
Strategic Cost Management
Over the past 50 years, global competition has evolved to a level where technology, quality, customer service, delivery, and brand no longer differentiate world-class companies. In order to achieve and maintain a sustained competitive advantage, firms must now provide all of the above at a lower cost than their competitors.
As cost management moves to the forefront of business strategy, companies are beginning to realize that in order to effectively manage costs, they must first understand the elements that comprise the total cost of ownership.
Participants can expect short and long term benefits from this course.
Short-Term
The class equips participants with a proven cost management tool-kit that can be utilized in cost negotiations with suppliers. Some of the techniques can be used to obtain "quick-hits" when applied to specific situations. It helps establish a discipline for all future cost negotiations and enhances the credibility of procurement professionals.
Long-Term
This class helps to lay the foundation for mutually beneficial supplier relationships. The concepts covered are "extremely tough but wonderfully fair" when applied across a supply base. It allows supply chain professionals to avail of any negotiation opportunities that might still be available and set the stage for developing and implementing ongoing collaborative cost management strategies using Anklesaria's AIM & DRIVE® process.
| Learning Objectives |
- To obtain, understand and apply a set of cost management tools that enable the transition from leveraging volume to leveraging ideas
- To gain a better knowledge of the cost structure of goods, equipment or services procured
- To differentiate between Zero Base PricingTM (negotiation) and AIM & DRIVE® (process improvements)
- To distinguish between price and cost management
- To identify data sources in building cost models
- To apply cost models in effective negotiations
- To use Price DisciplineTM in long term contract negotiations
- To apply Total Cost of Ownership principles in sourcing decisions
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| Target Audience |
This course is best suited for Buyers, Procurement Specialists, Materials Engineers, Procurement Engineers, Materials Managers, Procurement Managers, R&D Engineers, Financial Analysts, Logistics and Quality Assurance Personnel. Sales and Marketing personnel will also find these concepts extremely useful in understanding the new demands and needs of their customers.
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| Pre-class Requirement |
To ensure that all participants begin the class having understood the fundamental principles of cost management a limited amount of pre-work may be necessary.
Participants will be required to browse through selected chapters of the book "Zero Base Pricing?: Achieving World Class Competitiveness Through Reduced All-In-Cost", by Burt, Norquist and Anklesaria. They will then need to take a self-test provided in the "SCM Pre-seminar Workbook". Answers to all questions as well as the page reference from the text are provided in the workbook.
Pre-class assignment will take approximately 7 - 12 hours to complete
Note: Pre-class material will not be reviewed in class but the concepts need to be understood to work through the exercises in the seminar.
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| Class Time |
2 days (16 hours)
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| Class Size |
20-25 participants
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| Certification |
This course is worth 16 Continuing Education Hours toward ISM's C.P.M. Recertification
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| Program Outline |
- The AGI Total Cost Solution Toolkit
- Case Study: Zero Base PricingTM
- Price Analysis
- Quote Comparisons
- Internet Catalogues and auction sites
- Historical Price Comparisons and Independent Estimates
- Cost Analysis
- Price Vs Cost Analysis
- Definition of Cost Elements
- Types of Cost Models
- Building Cost Models
- Product and Service Should Cost Models
- Identifying data sources
- Constructing basic industry & process-based cost models
- Use in negotiations
- Case Study: Product Should Cost Model
- Case Study: Service Should Cost Model
- Percentage of Sales
- Identifying data sources
- Constructing a cost model
- Price DisciplineTM
- Establishing base year cost structure
- Identifying tracking mechanisms
- Monitoring changes in price, rates and productivity
- Case Study: Price Discipline Model (Product/Service)
- Total Cost of Ownership Model
- Determining Life Cycle Costs
- Calculating Present Value
- Use in Sourcing Decisions
- Case Study: TCO Model ((Product/Service))
- Profit Management
- When to discuss profit
- Profit calculation methods
- Implementing SCM
- Critical Success Factors
- Next Steps
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