Supplier Cost Breakdowns - A technique to reduce costs

By asking your suppliers for cost breakdowns for your parts, you will be able to answer the following questions:

• How expensive is the raw material you specified?

• How much material does your part require and does it correspond to what you specified?

• How does the processing cost compare to other items made through the same process?

• Are the most expensive items competitively priced? What is the scrap?

• What types of labor costs are required and are the rates reasonable?

It is advised that you speak to your suppliers, expressing your desire to analyze your costs so you can determine opportunities to reduce costs , while still being able to maintain their profits.

Example of a cost breakdown