The End of Price-Based Procurement

Your best-priced supplier may be your biggest missed saving. Commodity, freight, energy and tariff swings have broken the link between price and cost, so benchmarks tell you who is cheapest, not what the part should cost. In one automotive case, three suppliers looked best-priced and the category was taken off the savings pipeline. Should-cost analysis then found different grades of copper and steel and different manufacturing processes behind those prices. That produced more than 15% savings from the highest-volume supplier, and the team then reopened other categories it had considered closed. Find out how to negotiate on cost drivers instead of price.