Advanced Purchasing Techniques, Negotiation, and Cost Reduction

Introduction:

In today’s dynamic business environment, organizations invest a significant portion of their revenue—sometimes more than 50%—in purchasing and procurement. Effective management of these functions is crucial for enhancing profitability.

This course on Purchasing and Negotiation Strategies for Cost Reduction is designed to elevate participants' performance to world-class standards. It offers a comprehensive overview of purchasing and negotiation strategies that enhance efficiency.

Participants will identify areas for improvement and implement measures to achieve substantial savings in supply management.

Objectives:

By the end of this course, participants will be able to:

• Comprehend world-class purchasing and procurement strategies for cost reduction.
• Perform intelligent data mining and strategic planning.
• Identify and apply cost enhancement and reduction opportunities.
• Develop and use the purchase price index for cost reduction strategies.
• Report and monitor cost savings using a structured approach.
• Differentiate between cost reduction and cost avoidance.
• Apply advanced techniques for supplier price analysis and negotiation.
• Optimize processes by outsourcing non-core activities and focusing on value-added functions.
• Implement advanced methods for supplier qualification and cost reduction.
• Plan effectively before engaging in negotiations.
• Evaluate and prioritize issues during negotiations.
• Negotiate key contract clauses effectively.

Training Methodology:

• Case studies
• Role plays
• Simulations
• Workshops
• Expert lectures
• Group discussions
• Projects
• Real-life situations
• Participatory activities

Course Outline:

Unit 1: Continuous Improvement in Cost and Productivity

• Evolution of purchasing negotiation strategies
• Understanding the purchasing function
• Savings models and their impact on cost savings
• Total Cost of Ownership models and their benefits
• Implementing cost reduction strategies
• Effective communication of cost savings
• Tools for data mining in procurement
• Spend management and ABC analysis
• New perspectives on purchasing expenses

Unit 2: Identifying Focus Areas for Cost Reduction

• Generating ideas for cost reduction with user groups
• Analyzing company purchase price indexes
• Complexity of supply markets and supplier pricing methods
• Importance of benchmarking techniques
• Process mapping to eliminate non-value-added activities
• Developing top-level purchasing strategies
• Addressing cost increases
• Evaluating supplier performance
• Techniques for cost reductions
• Strategies to support cost management policies

Unit 3: Methods of Price Evaluation

• Price justification
• Schema approach to method selection
• Pricing analysis techniques
• Rivalry and past prices
• Acceptable profit margins
• Cost component analysis
• Formulating ‘should cost’ estimates

Unit 4: Successful Negotiations

• Role of the agency in negotiations
• Key negotiation skills
• Preparation for negotiations
• Persuasion techniques
• Understanding issues and contract clauses
• Terms of payment, advance payments, and guarantees
• Conflict resolution models
• Professional ethics in purchasing and contracting

Unit 5: Evaluating Strengths and Weaknesses

• Self-assessment of negotiation positions
• Evaluation of the Best Alternative to a Negotiated Agreement (BATNA)
• Analyzing the other party’s stance
• Structuring negotiation goals
• Planning forms for negotiations
• Preparing the negotiating team
• Tips for successful negotiations