Cost Optimization Program
NxtAsia optimizes the profits of theirs clients by reducing the material cost in the production process. In order to do so we run “C-O-P”. Our project approach consists of following the steps of analyzing, identifying, targeting, implementing and securing.
Simply put, this service focuses on reducing procurement costs, preferable for manufacturing or trading companies with high COGS and complex material groups, but also suitable for service companies with an overlook on its fixed and marketing cost.
Our Procurement Optimization service is separated into two single modules:
♦ 1. Feasibility Study (one month)
♦ 2. Execution (six to twelve months, optional depending on the results of feasibility study)
Feasibility Study: Our standardized Feasibility Study process focuses on exploring, collecting and analyzing the client's purchasing portfolio and data, internal system and process, personnel and organization, business partner and industry environment, everything that has an impact on the client's procurement cost and profitability. It is usually a 1 month project, but due to the level of complexity of the task, at times could take longer.
The activities include:
- Carrying out spending analysis by material groups (e.g. portfolio analysis, spec/technical requirements, commercial requirements, etc.)
- Conducting initial supply market research (e.g. long list, price benchmark, quality/technology screen, SWOT analysis of industry, competitor activity, SWOT analysis of current supplier base, etc.)
- Setting up cost reduction objectives per material group (both percentage and value) Developing execution plan (e.g. business case, resource planning, timeframe, action planning, etc.)
Execution: In the execution phase we are transferring figures into real money. Unlike other consultancies work, NxtAsia will be fully responsible for the implementation of project results as a big portion of our fees is performance related. In other words, our pay is from our client's gains. Our execution normally will be separated into two phases:→1st phase:
Negotiating with current suppliers for immediate results, so within three months, our clients will enjoy the benefits of cost reduction.
The tools employed are:
- Allocating and consolidating volume
- Benchmarking price from initial market research
- Opening cost book (cost modelling if necessary)
- Reengineering specification (downgrading specification, substituting materials, etc)
- Organizing supplier workshop
- Customizing negotiation tactics
→2nd phase:Developing new sourcing strategies and setting up a new supplier base for sustainable results.
The tools employed are:
- Intensifying market research (e.g. RFI, RFQ, supplier database)
- Sampling, pre-screening, qualifying short list
- Visiting suppliers and negotiating
- Contracting and developing products
- Introducing new suppliers with full consideration of geographic diversity, engineering capability, cost leadership, etc
- Consolidating the supplier base (e.g. strategic supplier alliance, suppliers hierarchy)
- Standardizing by reducing SKU's
- Managing cost erosion roadmap
- Setting up supplier auditing systems and performance measurement criteria (quality, production, technology, logistics and warehouse, project management, environment and labours, etc.)
- Developing integrated sourcing strategies for sustainable results
