Role of negotiation in cost reduction

Studies have shown that present suppliers become complacent about existing customers unless they are motivated to remain competitive.

Lack of knowledge to some guide when negotiating by procurement manages lead to high cost of finished product and it makes the product not to compete well with its competitors in the market. Is where large quantity of goods and services are exchanged for money with the aim of reselling them to industrial or ultimate consumer markets.

This is used as a process of buying in the market, but in a broader sense, it is a professional term used when buying goods and services by organisations, companies, industries, commerce and corporation by a professional buyer.

Changing packaging may reduce labor charges. In the Role of negotiation in cost reduction and public sector, their total expenditure is mainly spent on acquiring either materials or facilities or services.

The procurement manager would have to collect and study all relevant facts before meeting the supplier, and then develop an agenda for the meeting to negotiate with the supplier. A saving may result by loosening a tolerance of a casting without incurring any product failure or getting any less customer satisfaction.

The other cost factors should never be ignored, but prices are the best general indicator of competitive suppliers. Hough is a frequent contributor to this blog. Increasing the quantity ordered provides economies of scale to the supplier who in turn should pass on a portion in the form of quantity discounts.

Lack of transparency has lead to excess spending, increasing cost of production, losing a lot of money through the inflating of prices, over invoicing and overpayment of materials procured. Any increases in quantity ordered must be compared with the cost of any need to keep additional inventory on hand.

Handbook of Purchasing Management by Dr. This study is specifically designed to: Use of the Internet, procurement cards, and blanket orders all contribute to efficiency and reduced cost.

Examples of these markets are distributors, wholesalers, retailers and associations. In addition, we have been one of the most requested providers on Findcourses. The impact expected at the end of these is to minimise cost and maximise profit of the organization, and also to ensure that the end products stand in the competitive market, to satisfy the taste of consumers and promote the standard of living economy and the society at large.

High cost incurred in material procurement is as a result of procurement manager not doing his home work well that is by planning his objectives and strategy before hand and he enters the session without a positive attitude of success.

It is usually, although not always, easy to find a supplier to provide what is needed. The major research question of what re the techniques for negotiation the strategies for effective negotiation, the rate of material availability, how coordination and management of suppliers to ensure cost reduction and constant flow of materials to avoid interruption at the point of production.

To reduce cost, negotiation is one of the techniques to use, since negotiation is an art of arriving at a common understanding through bargaining on the essentials of a contract such as delivery, price, terms and condition of service, payment. Savings can be achieved by eliminating multiple sources for the same item.

What else can be done, and what other mean can be used to acquire raw materials without incurring high cost. Reducing the amount of inventory saves investment, saves space, and avoids deterioration and obsolescence.

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Split sourcing provides insurance against one supplier failure. Changes in the type of material such as a steel, plastic, or chemical may reduce cost significantly if the specification does the job intended.

Purchasing Techniques, Negotiation and Cost Reduction

Is an agreement to buy, sell or exchange made after discussions in order to arrived at compromise Specification: To expose purchasing manager to possible tools of spend and cost management.Education Index role of negotiation in cost reduction in manufacturing firms in kenya.

a case study of kisii bottlers limited role of negotiation in cost reduction in manufacturing firms in kenya. a case study of kisii bottlers limited.


Six Proven Ways to Reduce Cost. January 8th, | Tags: cost analysis, (See also post on Cost Analysis) 1. Negotiation. Discussions with a new or existing supplier may lead to a reduction in cost.

Obtaining new bids helps the buyer compare present prices and terms with other suppliers and forms the basis for discussions with the present. Purchasing Techniques, Negotiation and Cost Reduction 20 CPD Hours £3, Barcelona. whether you want to change career paths or further develop your current role we are here to help.

Here are some more advantages of choosing London Training for Excellence. The aim of this study is to assess the role of negotiation approaches used by manufacturing firms in cost reduction and in particular Kisii Bottlers.

Firms which have embraced cost reduction strategies have always underperformed or are faced with sustainability crisis, price negotiations at the purchasing level are one important cost. Negotiation as a reduction technique in material procurement is to ensure that high cost incurred in material procurement is manage hence the negotiation is one of the tool in spend cost management to optimise profit in every organization.

role of negotiation in cost reduction in manufacturing firms in kenya. a case study of kisii bottlers limited; To find out challenges faces by Kisii Bottlers in using negotiation approaches.

iv. To establish negotiation plan that will be best applicable to Kisii Bottlers. Cost Reduction There are right cost reduction techniques and.

Role of negotiation in cost reduction
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