Wouldn’t it be easier if Purchasing was just that — spending what you needed without regard for cost? Of course, we all know it doesn’t work that way.

One of the most critical elements of the Purchasing function is cost containment.

According to at least one expert, it’s best to break it down into the “4 Cs” of cost containment, to get the best handle on expectations and demands.

Consolidation. It’s the idea that buying in bulk can save you money. That’s why so many people go to commercial consumer warehouses and buy toilet paper in 100-roll packages. The same applies in purchasing and supply management. If you can consolidate your spending needs into larger categories or combinations — a “market basket” — it’s more likely you’ll be able to bargain for cost savings.

Competition. The more competition you can stoke among suppliers, the better it turns out for you. If suppliers feel like they don’t have any competition, they’ll low-ball you and keep it there. Instead, make ‘em sweat a little — and come in with lower bids for the supplies you need.

Contracting. Some goods and supplies are best bid out on a one-shot basis. But winning long-term commitments from suppliers can yield long-term savings for you. Look at ways to bring suppliers in for the long haul, and lock in a fair price.

Collaboration. Once you’ve signed to work with a supplier, you can expand the partnership into mutually beneficial areas. Set up regular meetings during the contract period, where you can discuss waste, inefficiencies, and ways to drain excess costs from supply chain functions. You’ll both have a stake in reducing costs.

Tags: competition, consolidation, cost containment, purchasing