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Savings in Your Backyard

In our work at freebenchmarking.com, one of the surprising findings is the amount of cost reduction available to companies by just implementing pricing that they have already achieved with suppliers. In times of economic uncertainty and with price reductions getting more difficult to achieve, companies can't afford to let profits leak away. We see two main reasons for this surprising finding. The first is that companies using multiple EMS and ODM manufacturing partners do not have a process for methodically identifying and addressing price discrepancies between partners for all their commodities. The second is that companies are often unaware of...


Author: Category: Component Pricing, CostComments: 0Post Date: October 10, 2011

Many Advantages of a Strong Knowledge Chain

Knowledge chains enable supply chain performance. They bring together the information and context that let you make decisions and take actions. Gaps in a supply chain are noticed and fixed immediately, but holes in a knowledge chain often go undetected. This is because supply chain gaps are usually catastrophic, but knowledge gaps are performance-limiting. How do you know what you don't know and whether it could lead to better decisions? I will give you an example from one of our clients. A very large corporation improved its cost reduction by 50 percent in recent negotiations using target pricing delivered through...


Author: Category: Component Pricing, Corporate, Cost, Overhead Costs, Product Cost, StrategyComments: 0Post Date: September 15, 2011

The Post Capitalist Society

To paraphrase Peter Drucker in his book, Post Capitalist Society, what Karl Marx envisioned has been achieved in America, and true capitalism is alive today in China. Marx wanted the wealth of companies to be in the hands of the workers. This has been achieved in the West through the holdings of pension funds. Capitalism, taking personal financial and business risks to create wealth, is now the China story. So from an economic perspective, China is capitalist and we, in the west, are the opposite. To make this convolution worse, Wall Street hijacked our wealth and lost it. This dark...


Author: Category: Corporate, Strategy, UncatagorizedComments: 0Post Date: July 6, 2011

The Myth vs. Reality of Worker Productivity

I am disturbed by how many of my friends are unprepared for retirement. I shouldn't be surprised, however -- walk through Wal-Mart or stay at any North American hotel, and you see too many older people, who should be enjoying their golden years, working. I'm also disturbed by the high levels of unemployment; skilled people who should have jobs don't, and many jobless people don't appear in statistics because they have just given up. With older people trying to get by in the face of failed investments, and the absence of well-paying jobs suited to people's skill sets, I'm surprised...


LiveChat Follow-Up on Price Competitiveness (Part 2)

As promised in my previous post, LiveChat Follow-Up on Price Competitiveness, Part 1, I am outlining in this blog the final two actions from my top five steps to ensuring competitive pricing in the current environment. This follows on the request from EBN readers for more specific information on how to achieve better pricing, beyond what we were able to cover in last month's LiveChat. The last two suggestions follow: 4. Manage markups. Understand your supply chain and where value is created in it. Always maintain control of your approved vendor list (AVL) and make sure your suppliers know that you...


Author: Category: Component Pricing, Corporate, Cost, Strategy, UncatagorizedComments: 0Post Date: April 12, 2011

LiveChat Follow-Up on Price Competitiveness (Part 1)

Several of you have asked for more specific information on how to achieve better pricing, beyond what we were able to cover in last month'sLiveChat. In a two-part response, I want to discuss my top five actions that can improve your price competitiveness in the current environment. 1. Use target pricing: This is not a new technique, but its utility has been enhanced withFreeBenchmarking.com. The specifics of using target pricing for cost reduction are detailed in the whitepaper, "Successful Negotiating Using FreeBenchmarking.com," posted on EBN, so I won't describe the details here, but imagine a continuous process where each quarter...


Author: Category: Component Pricing, Corporate, Cost, Strategy, UncatagorizedComments: 0Post Date: April 5, 2011

The Price Change Equation

The late Richard Beckhard, industrial psychologist and adjunct professor at the MIT Sloan School of Management, developed an equation for change. He called it a "change equation" when really it was its vector equivalent -- progress -- but as he's not a physicist, he can be forgiven. His equation describes how to achieve change in a positive direction. Three factors are multiplied together to achieve change. Being a multiplication product, if any factor is zero, the result is zero, and change won’t occur. The three factors are a desired future state; an unsatisfactory current state; and some critical first steps...


Author: Category: Component Pricing, Corporate, Cost, StrategyComments: 0Post Date: March 3, 2011

Calling the Shots in Component Pricing

With pricing for metals and ceramic materials on the rise and the inventory of semiconductor components growing, are we at the mercy of these trends when setting the prices we pay for electronic components? My answer to this is "Yes" as a community and "No" as individual companies. Companies are not helpless in influencing prices; the situation is very different from what we experience at the gas pumps when filling our SUVs or hybrids. Prices on some components may be going up, but there is such a wide price variation among suppliers that a prepared company should be able to...


Author: Category: Component Pricing, CostComments: 0Post Date: February 24, 2011