Cost Reduction Tool #1 (Volume Analysis )Brought to you free by- Turner and Turner LLC
OverviewOver a four year period I was able to identify and recover over 100M USD for alarge corporation. This is not typical but possible.Covered in this presentation is one of the techniques used to cultivate and clearlarge volumes of Purchases.
Volume Technique Step #1Isolating Likely Overspends The Task: Use rule of thumb estimates to quickly sort through all purchases. How to do it: Develop generic cost groups of purchases. Trend costs for each group should become apparent. Use a 30% reduced cost qualified to weed out the top likely candidates for overspend. Example: I estimated that all widgets should have 100K in tooling to make small ones, 200K for Medium, and 500K for large ones. I lowered my estimates by 30% and isolated all widget tooling costs that exceed my estimates.
Volume Technique Step # 2Amplify Your Efforts What you are doing: Amplify and Quantify your efforts by giving direction to the company’s being audited. You want to shift the man-hours for the bulk of the analysis work to the supplier thus “force multiplying” your ability to do the work. How to do it: With as few words as possible, circulate mass questioning on the cost overages. Make it sound like an accusation and don’t give them a lot of time to plan a response. Tell them to feedback information to you in a format that allows you to quickly go through the data. Example: Email to Bob’s widget manufacturing : Tool # 29899303 is 30% over cost budget. I need the numbers explained or reduced. You have 24Hrs to respond or I push the debit through the system.
Volume Technique Step #3Work Hard What you are doing: Pushing through data at breakneck speed. How to do it: If you have the drive and experience you should be able to go through mountains of data relatively quickly. Example: Most people save two to three dollars for every dollars spent on their service. So if a guy makes 1K a week you should expect 3K on average weekly savings. I have been able to reach $120 an hour giveback per dollar spent and can do so again when the conditions are right. I would suggest that if you are not seeing these types of results you should contact my company to arrange outsourcing of the process. I do it remotely for companies already with outstanding results.
SummaryTo utilize this techniques you must first isolate probableoverspends, leverage the suppliers man-hours foranalysis, and do the work.I take a great deal of pride in this type of work and wishall the best for those who also do it for a living.In the near future, I will be publishing a “How To” guidefor enabling Cost Reduction groups that you will be ableto hand to your management.
If you have any questions or comments please contact me at the following:E-mail TomTurner@TomTurner.BIZWebsite TomTurner.BIZOther free content can be found on my website so please stop in and take alook.All my bestTom Turner - Owner T and T LLC