“Our product is too expensive!” – Who hasn’t heard this comment from sales teams?
Most companies at some point of time have been in the uncomfortable position of knowing that their product isn’t competitively priced for the marketplace.
And in many cases, the Bill of Materials is where the problem lies, since that is usually the single largest cost element in the product. Several factors may cause Bill of Materials’ cost inflation, such as:
• Technology improvements reduce component costs and that advantage is leveraged by the competition.
• ‘Hi-speed’ product launches do not provide enough time for component cost optimization.
• Multiple divisions or locations of a company buy the same parts using different internal part numbers at different prices.
• Low Cost Country (LCC) sourcing is not thoroughly evaluated.
• Component suppliers may have reduced costs but may not have passed on the benefits.
• Mergers and acquisitions may create purchasing trends that are inefficient.
Our Bill of Materials cost reduction service uses a multi-staged process that is defined based on the level of flexibility that each customer might be willing and able to implement.