CPSM 1B2: Developing Cost Management Program Strategies for Purchases

The second part of the CPSM Exam 1 requires professionals to have a substantial understanding on how to develop cost management program strategies for purchases. You can encounter 6 questions in the CPSM Exam 1 regarding cost management program strategies.

 

CPSM 1B2

The cost management program strategy for purchasing section is at the core of every supply management leader’s role. To secure a seat at the Chief Officer table, a Supply Chain Leader must have a grasp not only the costs in terms of dollars but he/she should be able to hold his/her own while discussing things with the Chief Financial Officer.

Cost Savings

If you’ve been in the Supply Chain Industry for quite some time, then you have probably dealt with the question of “total cost of ownership” which includes the following:

a)    Purchasing Cost

b)    Installation Cost

c)     Service Cost

d)    Disposal Cost

Organizations that value sustainability gives great importance to disposable cost, mode and impact on environment. Thus, if two vendors provide comparable cost solutions but the other supplier has better sustainability element, you should go for the supplier with more sustainable solution.

 

Value Analysis Processes and Value Engineering

CPSM 1B1 also covers some concepts of value analysis and value engineering. Value analysisis focused on studying existing processes and products relevant to what you are purchasing. Meanwhile, value engineering is concerned with the development stage of new product and innovation process. If you are building a prototype of a certain product, value engineering kicks in.

 

Establishing Cost Management Program Strategies

Cost saving programs strategies is either reducing historic costs or avoiding additional cost. Value analysis and value engineering play a great part to these considerations.

Cost modelling is helpful in establishing cost management program strategies. Modelling involves creating a formula or a spreadsheet that allows you to plug in changing variables and see its impact on your purchased product.

 

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