The most obvious method of reducing the cost of
the raw materials you’re using is to get a lower price from your
supplier. But this is only part of the story and it can be
misleading because the cheapest “price” may not always be the
cheapest “cost”. To get a true a picture of how much your raw
materials cost, you must look in more detail and examine the
through-costs of the raw materials you’re using.
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
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
High production costs are often difficult to
identify but still reduce profit.
Raw material costs are often only a fraction
of total production costs.