Presentation --By Deepak Suri[1]

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


To#ic



Du$%tion



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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



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


! %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)



! %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)



! %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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! %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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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



Transport


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990504MB-MMY010-(L)

ESTIMATION O+ CON-ERSION COST

Machine hour rate %s.


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990504MB-MMY010-(L)




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990504MB-MMY010-(L)

CALC'LATING MAC&INE &O'R RATE



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990504MB-MMY010-(L)




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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



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990504MB-MMY010-(L)




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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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Cost



Transport

PAC/ING 0 TRANSPORTATION COST


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990504MB-MMY010-(L)

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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Cost



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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990504MB-MMY010-(L)

! 9alance sheet anal(sis

! ,inear performance pricing

! 9enchmar&ing +ith eisting parts



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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



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990504MB-MMY010-(L)




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



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990504MB-MMY010-(L)




(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)


To#ic



Du$%tion


990504MB MMY010 (L)

TERMS O+ P'RC&ASES TO (E NEGOTIATED


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! 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)


To#ic



Du$%tion


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


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



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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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( )


To#ic



Du$%tion



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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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Presentation --By Deepak Suri[1]

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Transcript of Presentation --By Deepak Suri[1]