Download - Presentation --By Deepak Suri[1]
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8/11/2019 Presentation --By Deepak Suri[1]
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Pricing of bought-out parts
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990504MB-MMY010-(L)
TYPICAL PRICE SETTLEMENT PROCESS
Cost Price
Negotiation
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990504MB-MMY010-(L)
AGENDA
1. Should be costing ! "inutes
To#ic
2. Negotiations 20 minutes
3. Material cost reduction 20 minutes
Du$%tion
4. Initiatives in Sourcing 0 minutes
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990504MB-MMY010-(L)
AGENDA
1. Should be costing ! "inutes
To#ic
2. Negotiations 20 minutes
3. Material cost reduction 20 minutes
Du$%tion
4. Initiatives in Sourcing 0 minutes
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990504MB-MMY010-(L)
S&O'LD (E COSTING ) *%$ious cost ele"ents
Cost
Raw Material Conversion Profit
Over headsI. C. C.Packing &
Transport
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990504MB-MMY010-(L)
S&O'LD (E COSTING ) *%$ious cost ele"ents
Cost
Raw Material Conversion Profit
Over headsI. C. C.Packing &
Transport
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990504MB-MMY010-(L)ESTIMATION O+ RA, MATERIAL COST
! Material "sed # Specification $
! %ate per &g.
! Input 'eight
! Scrap recover(
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990504MB-MMY010-(L)
ESTIMATION O+ RA, MATERIAL COST
! Material "sed # Specification $
! %ate per &g.
! Input 'eight
! Scrap recover(
Source)
*ra+ings
Supplier discussion
,ab
e( points
nsure that right material is
used
If re/uired chec& +ithdesigner
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990504MB-MMY010-(L)
ESTIMATION O+ RA, MATERIAL COST
! Material "sed # Specification $
! %ate per &g.
! Input 'eight
! Scrap recover(
Source
Mfgrs. Price list
Magaines 1 periodicals
Metal echangesssociate companies# M"S56etc.$
e( points
,anded cost to be considered
*iscounts due to bul& /t( or
consortium bu(ing efforts # M7Mrates $
nsure tat %M is procured from
mfr.. nd not through traders
e( %M rates to be trac&ed
on periodic basis
Steel sheets
8orging steel
u6 l6 P9
Pol(mers PP6 9S6 Plastic
:lass
Pig iron
Impact 1 lin&age of metal
prices +ith ,M 1 imports tobe understood
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990504MB-MMY010-(L)
ESTIMATION O+ RA, MATERIAL COST
! Material "sed # Specification $
! %ate per &g.
! Input 'eight
! Scrap recover(
Source
*ra+ing
Ph(sicall( +eighing of parts
;heoretical estimation
e( points
Input +t. Must be accurate
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990504MB-MMY010-(L)ESTIMATION O+ RA, MATERIAL COST
! Material "sed # Specification $
! %ate per &g.
! Input 'eight
! Scrap recover(
Source)
Scrap traders
ssociate companies
e( points
'hether scarp can be used
for other parts e.g. +ashers6
small parts6 etc.
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990504MB-MMY010-(L)ESTIMATION O+ RA, MATERIAL COST
RAW MATERIAL COST CALCULATIONS
RM BASIC PRICE 20.00
EXCISE DUTY 15% 3.00
SUB-TOTAL 23.00
SALES TAX 4% 0.92
SUB-TOTAL 23.92
OCTROI 2% 0.48
FREIGHT 0.50
TOTAL 24.90
LESS MODVAT 3.00
LESS SET OFF 0.00
LANDED COST 21.90
IPUT !EIGHT "#G$ 2.50
GROSS COST 54.75
FIISHED PART !T 2.00
SCRAP !T 0.50
RECOVERY 80% 0.40
SCRAP RATE 5.00
RECOVERED COST 2.00
NET COST 52.75
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990504MB-MMY010-(L)-%$ious cost ele"ents
Cost
Raw Material Conversion Profit
Over headsI. C. C.Packing &
Transport
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990504MB-MMY010-(L)
ESTIMATION O+ CON-ERSION COST
Machine hour rate %s.
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990504MB-MMY010-(L)
ESTIMATION O+ CON-ERSION COST
Machine hour rate %s.
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990504MB-MMY010-(L)
CALC'LATING MAC&INE &O'R RATE
ESTIMATION O+ CON-ERSION COST
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990504MB-MMY010-(L)
ESTIMATION O+ CON-ERSION COST
Machine hour rate %s.
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990504MB-MMY010-(L)
TIME MEAS'REMENT
!;ime stud( +ith stop +atch # +idel( accepted$
!M5S; techni/ue # epertise needs to be developed$
!onsultation +ith eperts
!;ime elements@Set up time@5peration time
;otal time ta&en
@#Set up time1 batch sie$ plus operation time
ESTIMATION O+ CON-ERSION COST
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990504MB-MMY010-(L)
ESTIMATION O+ CON-ERSION COST
Machine hour rate %s.
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990504MB-MMY010-(L)
C'TTING TOOLS COST
utting ;ool cost A landed cost of tools 1 life of tools
L%nded cost
9ased on invoice
Lie
mfgrs.1B catalogues
Shop epertise
Past consumption data
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990504MB-MMY010-(L)-%$ious cost ele"ents
Cost
Raw Material Conversion Profit
Over headsI. C. C.Packing &
Transport
PAC/ING 0 TRANSPORTATION COST
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PAC/ING 0 TRANSPORTATION COST
P%cing cost
Pol( bags +t. 9ag rate per &g
+tA,#inch$ '#inch$ ;#micron$133001000 &gs per bag
arton +t. 1 carton 2 paise per gm
'ooden bo cu. 8t rate 1 cu. 8t
T$%ns#o$t%tion
9ased on mar&et rates 1 M7M contract rates
- i t l t
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990504MB-MMY010-(L)-%$ious cost ele"ents
Cost
Raw Material Conversion Profit
Over headsI. C. C.Packing &
Transport
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S&O'LD (E COST
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990504MB-MMY010-(L)
S&O'LD (E COST
%a+ material cost ?0
onversion cost 40;ooling cost 03
Subtotal E3
I on %M 2.0
Profit 7 5verheads on 9 E.3
Pac&ing 7 8or+arding 0.?
%eFection on 9 2.0
Should be cost 0G.=
ISS'ES ,IT& S&O'LD (E COSTING
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990504MB-MMY010-(L)
SS' S S O' COS G
! *ifficult( in getting details
! Proprietar( suppliers reluctant to share cost info
! ;ime constraints
ALTERNATE COSTING MET&ODS
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! 9alance sheet anal(sis
! ,inear performance pricing
! 9enchmar&ing +ith eisting parts
ALTERNATE COSTING MET&ODS
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990504MB-MMY010-(L)
9alance sheet anal(sis
,inear performance pricing
9enchmar&ing +ith eisting parts
(ALANCE S&EET ANALYSIS
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990504MB-MMY010-(L)
P$oit 0 loss %ccount
Income
Sales
5ther income
penditure
%a+ material consumed
cise dut(
Personnel cost
Stores consumed6 po+er
Interest
*epreciation
Pac&ing and transport cost
5ther costs
(%l%nce sheet:ross bloc&
Net bloc&
Sources of funds
Sundr( creditors
Sundr( debtors
(ALANCE S&EET ANALYSIS) conti3.
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990504MB-MMY010-(L)
Schedules to P$oit 0 loss %ccount
8inished products-nos 7 value
apacit( utiliation # leverage$
Po+er units consumed6 rate
MaFor ra+ material procured
astings
8orgings
Steel6etc.
MaFor imports 7 eports
&O, TO ESTIMATE COST 'SING (ALANCE S&EET
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990504MB-MMY010-(L)
Esti"%te the RM cost
Stripping the parts # proto or production$
95M from dra+ings
9( using the spare catalogues
'eigh each parts and approimatel( find out %M cost
ompare this +ith /uoted cost
+$o" P0L st%te"ent ind out ollo4ing #e$cent%ges
%a+ material cost
onversion cost
Personnel cost
5verheadsSales margin
stimate final price b( appl(ing ratios to %M cost
ALTERNATE COSTING MET&ODS
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990504MB-MMY010-(L)
9alance sheet anal(sis
,inear performance pricing
9enchmar&ing +ith eisting parts
LINEAR PER+ORMANCE PRICING
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990504MB-MMY010-(L)
!
5!!
1!!!
15!!
6!!!
65!!
! 1 6 7Performance parameter
Price
in%s.
ample of Starter motor
Higher price
,o+ price
ALTERNATE COSTING MET&ODS
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990504MB-MMY010-(L)
9alance sheet anal(sis
,inear performance pricing
9enchmar&ing +ith eisting parts
(ENC&MAR/ ,IT& E8ISTING PROD'CTS
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990504MB-MMY010-(L)
! ompare +ith similar parts supplier b( the supplier or othersuppliers
! ompare +ith spare parts prices
! ompare +ith M7M parts prices
! ;a&e help of retired persons from industr(
TYPICAL PRICE SETTLEMENT PROCESS
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990504MB-MMY010-(L)
Cost Price
Negotiation
( )
AGENDA
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990504MB-MMY010-(L)
1. Should be costing ! "inutes
To#ic
2. Negotiations 20 minutes
3. Material cost reduction 20 minutes
Du$%tion
4. Initiatives in Sourcing 0 minutes
990504MB MMY010 (L)
TERMS O+ P'RC&ASES TO (E NEGOTIATED
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990504MB-MMY010-(L)
! 9asic price
! plore sales ta +aiver option 1 +hether supplier has rightl( categoriedthe parts for sales ta
! Supplier is in ecise or not for modvat purposes
! clude frt. 8rom basic price for S; purchases
! Prices for spare purchases
! Price for other plants
! Price revision methodolog( 1 parameters e.g. 5ne rupee increase in %Mmeans %s..2? increase in basic price
! olume based prices if initial volumes are lo+
! Pa(ment terms depending upon interest rates and cash flo+s
990504MB MMY010 (L)
ART O+ NEGOTIATION
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990504MB-MMY010-(L)
! Negotiate onl( +ith those in authorit(
! Start +ith an open mind and a positive attitude
! 9e prepared in all aspects- it +ill boost the confidence
! ,isten
! ommunicate clearl( and confidentl(
! have a time perspective
! Have a sense of humour
990504MB MMY010 (L)
+O'R DON9T
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990504MB-MMY010-(L)
! *onCt accept the first offer- atleast not immediatel(
! *onCt be the first@to /uote a price@to offer to split the difference
! *onCt admit 1 sho+ (ou are under time pressure
! *onCt leave a single issue outstanding
990504MB MMY010 (L)
TIP +OR E++ECTI-E NEGOTIATION
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990504MB-MMY010-(L)
! ,earn to read the other part( needs to become good negotiator
! 9e prepared to compromise +hen (ou negotiate
! *etermine (our strateg( according to the t(pe of negotiation
! 9e sure to gather all information relevant to negotiation
! Sit as an observer in other people negotiations
! ;al& to people +ho &no+s the other part(
! 'ear clothes +hich are comfortable
! void short tempers 7 frustrations +hen negotiating and never +al& out in rage
! ;r( to set agenda nd include timings for each issue under discussion
C
990504MB MMY010 (L)
TIP +OR E++ECTI-E NEGOTIATION)) conti...
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990504MB-MMY010-(L)
! Indicate that ever( concession (ou ma&e is a maFor loss
! s& for brea& to consider an( ne+ proposal
! ngage onl( on arguments that are constructive
! Never undermine of dignit( of the opposing part(
! 5ffer the smallest concession first- (ou ma( not need to go an( further
! %ecord full( all agreements finalied at a negotiation.
990504MB MMY010 (L)
&ANDLING DI++ERENT TYPES O+ NEGOTIATORS
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990504MB-MMY010-(L)
CON+'SED
NEGOTIATOR
"se visual aids to clarif( issues that are causing confusion
Put comple proposals in +riting6 using short 7 clear sentences 8ollo+ a concise step-b(-step agenda to prevent further confusion
9e prepared to involve a third part( to revie+ the issues +ith freshe(e.
INDECISI-ENEGOTIATOR
Proceed slo+l( and methodicall( and be prepared to reiterate points
Promise a revie+ of the issues under discussion after a set period of
time dFourn to allo+ an indecisive negotiator to consult others in their
team
;r( to present the issues in a fresh and original +a(
AGGRESSI-ENEGOTIATOR
%eiterate all the facts6 &eeping calm and avoiding emotionallanguage
%efuse to be dra+n into aBbattle of +ords and sta( calm at all times
State firml( that intimidation6 bull(ing and threats are unacceptable Suggest an adFournment in the negotiations until tempers cool
EMOTIONALNEGOTIATOR
*o not challenge the motives or integrit( of the negotiators
*o not interrupt outbursts6 +ait patientl( to ma&e (our response
%espond to an( emotional outburst +ith rational /uestioning
dFourn to allo+ the emotional negotiators to calm do+n.
990504MB MMY010 (L)
ESSENTIAL +OR E++ECTI-E PRICING
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990504MB-MMY010-(L)
! ;rac&ing ra+ material trends and forecasting
! ;rac&ing &e( cost drivers of conversion cost@lectricit(@,abour@5ther maFor costs
! Have standard rates for commonl( used machines@,athe@Milling@*rilling@;raub6@Presses6 etc
! reate database of consumable and tools prices6 life
! ,ist of eperts for costing or optimiation of processes
990504MB-MMY010-(L)
AGENDA
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990504MB-MMY010-(L)
1. Should be costing ! "inutes
To#ic
2. Negotiations 20 minutes
3. Material cost reduction 20 minutes
Du$%tion
4. Initiatives in Sourcing 0 minutes
990504MB-MMY010-(L)ZXP-537.2/11
DE+INING TOTAL COST O+ O,NERS&IP
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990504MB-MMY010-(L)
Purchase cost
Internal
compan( costs
Joint supplier1
customer costs
;5
#;otal cost ofo+nership$
:
:
;
Warehousing
Purchasing
administration
R&amaged field
product
!actor"
"ield
#pecifications
$%pediting
Productioncapacit"
Transportation
Inventor" carr"ing
costs
Purchase
price
990504MB-MMY010-(L)
COST ('ILD)'P +OR TRANSMISSION CASE AT G&ATGE PATIL
IND'STRIES
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990504MB MMY010 (L)
> ssume metal sand ratio of )?
>> ,abour and po+er cost at 3D and =D of base price6 respectivel(Source) ;eam anal(sis
%upees6 per casting of ?? &g
?4332
320 30 < 30
?42
?=
23>
,ab-
our>>
%a+
mate-
rials
Moul-
ding
sand
ore
ma&ing
sand
GG.? 3E 3E @ 0.= 0.< 0.3 GG?>??
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990504MB MMY010 (L)
Source) M* Purchasing database
4GE3 GG220 ?
?=4?G0
40
4< ? 3 2G3E
9ase
price
cise Sales
ta
5ctroi Pur-
chase
price
8reight Machi-
ning
%eFects Hand-
ling
Inven-
tor(
'arr-
ant(
;otal
cost
%upees6 per casting of ?? &g
990504MB-MMY010-(L)
,AYS TO RED'CE P'RC&ASE COST
St%$te$ @uestions Di%gnostic indic%to$s
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990504MB MMY010 (L)
%educe
purchasecost
,everage
mar&et
po+er
Standardise
Set correct
product
tolerances
Substitute
"nbundle contracts
onsolidate suppliers
ombine +ith other materials
ompare across facilities;r( out ne+ suppliers
liminate middle person
%educe custom products
Increase purchase /uantities
Increase use of
components1subassemblies
;ighten
,oosen
%evise specifications
Ma&e process changes
! an total product costs
be reduced b(
consolidating or
unbundling purchase
volumesK
! 8re/uenc( of s+itching
competitors
! Industr( capacit( utilisation
! Historic rivalr(
! an alternative sourcing
channels be utilisedK
! merging suppl( mar&ets
! Ne+ entrants
! an total costs be
reduced through
standardisationK
! Item proliferation
! ,evel of product development
standardisation
! High ra+ material levels
! an total costs be
reduced b( changing
specificationsK
! High or lo+ scrap rates6
set up and re+or& in
manufacturing
! measure of consumer
perceived value
! an total costs be
reduced b( using
alternative materialsK
! ompetitors using
alternative materials
! 5ther analogous products
using alternative materials
! Ne+ materials in foreign
mar&ets
990504MB-MMY010-(L)
,AYS TO RED'CE INTERNAL COSTS
St t ti Di ti i di t
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( )
%educeinternal
costs
liminate
incoming
/ualit(control
liminate re+or&
%educe +aste1scrap
%educe lead time
! an total product costs
be reduced b(
consolidating orunbundling purchase
volumesK
! ,o+ defect rates
! 8e+ certified vendors
! ,o+ use of certificates ofanal(sis
St%$te$ @uestions Di%gnostic indic%to$s
Improve
inventor(
management
Manage c(cle and
safet( stoc&
%emove sludge
! an inventor( levels be
reducedK
! ,o+ ra+ material turns
! High obsolescence levels
! ,evel of epediting
Share
information
internall(
%educe transportation
costs
Improve capacit(
utilisation
%educe inventories
! an costs be reduced
through information
sharingK
! Schedule changes
! ,evel of epediting
! plicit or implicit pricing
! ,evel of information on
carrier utilisation
Improve
process
steps and
c(cle time
*ebottlenec&
Streamline processes
! an processes to
improved to reduce cost
and c(cle timeK
! ,arge volume of
paper+or&
! verage vs. standard lead
time
990504MB-MMY010-(L)
,AYS TO RED'CE OINT S'PPLIERBC'STOMER COSTS
St%$te$ @uestions Di%gnostic indic%to$s
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( )
%educe
Foint
supplier1
customer
costs
Involve
suppliers in
product
development
%educe1share %7*
costs
%educe processing
costs
o-develop proprietar(
materials
! an an( costs be
reduced b( involving
suppliers in product
developmentK
! volving technolog(
! ompetitors Loutsourcing
to vendors
! High costs that can beshared +ith other
customers
Share
information
+ith suppliers
and
customers
Share long-term volume
forecasts
Jointl( evaluate vendor
capital ependiture plans
alue anal(se specifications
! an forecast information
be used to reduce
supplier costsK
! 8avourable long run-length
economics
! /uipment efficienc(
potential
! High capacit( utilisation! ueuing1se/uencing
difficulties
ollocate +ith
supplier
%educe transportation
costs
Improve capacit(
utilisation
%educe inventories
! an collection be used to
reduce ;5K
! High inbound freight costs
! 8re/uent deliveries
! %emote suppliers
!,imited bac&haulopportunities
Manage file
c(cle costs
%educe obsolete
materials
%educe field failures
! an lifec(cle management
reduce costsK
! High field damage epenses
! High obsolete costs
! ,arge number of ne+
products
990504MB-MMY010-(L)
IDENTI+IED TCO RED'CTION LE-ERS IN +ES CASTINGS
A$e% Le*e$s Ide%s
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( )A$e% Le*e$s
! ,everage mar&et
po+er
! Set correct product
tolerances
! Substitute
Ide%s
! %econfigure supplier base@ onsolidate suppliers@ ;r( out ne+ suppliers
! onsortium bu(ing of pig iron
and M.S. scrap! valuate ma&e vs. bu(! liminate middle person! Manufacture to specifications
! Modif( design to reducecompleit(
! %evise specifications
! liminate incoming
/ualit( control
! 5ther ideas
! %educe reFects
! %educe inventories! %educe transportation
costs #detention and
demurrage$
! %educe logistics
costs
! %educe transportation
costs
%educe
purchase
cost
%educe
internal
business
costs
%educe
Foint
costs
Reducetot%l
TCO
990504MB-MMY010-(L)
AGENDA
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( )
1. Should be costing ! "inutes
To#ic
2. Negotiations 20 minutes
3. Material cost reduction 20 minutes
Du$%tion
4. Initiatives in Sourcing 0 minutes
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990504MB-MMY010-(L)
INITIATI-ES IN SO'RCING MANAGEMENT
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Sou$cing
ommodit( teams to decide strategies
'hat to bu(
'here to bu(
Ho+ to bu(
t +hat rate to bu(nd to end responsibilit( for a commodit(
Supplier transformation
"pgrading suppliers /ualit(6 deliver( and cost
Pricing ell 7 Purchasing cellence
990504MB-MMY010-(L)
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