By taking a through-cost approach to raw material buying you can make some significant savings. A through-cost approach simply means looking at all of processes that your raw materials go though to see if a different raw material would make the overall processes more efficient whilst still giving you a final product that meets (or exceeds) your requirements.

The difficult part of a through-cost approach is accepting the fact that you may have to initially pay more for a particular raw material in order to get a greater cost saving down the line. But it is only by taking this wider view that serious cost savings can be made.

Initially, you should consider three aspects of the raw materials that you buy – size selection, shape selection and grade selection. However you should also examine the possibility of being supplied raw materials in sizes, lengths, finishes and coatings that are already one-step closer to the finished component you have in mind. For many businesses, the most inefficient manufacturing operations are the initial 'cutting-to-size' operations that tie-up machines and operators that are meant to be doing more complicated work.

Furthermore, consider the following 'through-cost' tips

• Don’t compare prices per kg, compare prices per length or by cut piece.
   

• Look at what is being taken away from your business as scrap
   

• Poor grade selection can double the production costs.
   

• High production costs are often difficult to identify but still reduce profit.
   

• Raw material costs are often only a fraction of total production costs.