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Managing Price, Cost, & Potential Increases

An Elective Session of the Supply Chain and Logistics Management Certificate Program

Next Scheduled Sessions:    

August 25 - 26, 2015

About This Program
Today, purchasing, procurement, contracting, and supply management professionals must be the most informed groups in the company to combat potential increases. Simply put, to remain competitive in a fast-paced, global economy, your analytical techniques and skills must be top-notch. Worldwide competitive pressures require a greater contribution from the purchasing and supply function and suppliers to improve the organization’s relative position on price and cost. Managing Price, Cost & Potential Increases can be your road map to achieving cost containment.
Managing Price, Cost & Potential Increases is a highly concentrated seminar that discusses price, cost, and total value analysis theories in the choice of goods and services – those which you many have purchased in the past and those you are considering for the future.
One of Purchasing’s key functions is to determine the “right price”. But what exactly is the:
• Right Price?
• Fair and Reasonable Price?
• Total Cost of Ownership?
• Best Value at the Lowest Overall Cost?
• How are these analyzed and determined? What “should cost” techniques are most      applicable?
• Where do you begin?
You will find the answers you need in this valuable seminar. The comprehensive material presented in Managing Price, Cost & Potential Increases is both practical and job-specific as well as relatively easy to apply. Throughout the program you will work out challenging situations through various exercises under the tutelage of your instructor.
Please bring a portable calculator to the course.

Who Should Attend

This program is designed for purchasing, procurement, contracting and supply management professionals who want to learn the applications of statistical and financial techniques for analyzing purchasing “should cost” problems. It offers a practice-intensive learning experience to anyone responsible for supplier cost containment, negotiating prices and fees, and purchasing competitively priced goods and services. Managing Price, Cost & Potential Increases is recommended for buyers; material acquisition personnel; procurement staff analysts; contract administrators; commodity and sourcing specialists; purchasing agents; materials managers; and supply chain executives.


1. Evaluate any purchases using the appropriate mathematical formulas.
2. Realize the importance of price-cost information sources and references.
3. Identify the “best buy” for a given purchase through price and cost investigation.
4. Negotiate total cost of ownership more effectively with suppliers and contractors.
5. Use forecasting and spend analysis techniques to better understand future market conditions.
6. Improve inventory management using Economic Order and Purchase Quantity techniques.
7. Show a measurable contribution to the bottom line due to more effective purchasing decisions
and a deeper understanding of the economics of the marketplace.
8. Improve the return on investment from every purchasing dollar and your total spend.
9. Gain a working knowledge of the methods, techniques, and formulas for analyzing purchasing decisions.
10. Select the supplier, product or service, and the solicitation package that best meet the organization’s needs and budget.
11. Put the latest analytic tools to work – during the seminar – in individual and small group project sessions.
12. Conduct informed negotiations with greater confidence and certainty.
13. Apply “should cost” concepts that convert potential increases into ratios that highlight meaningful relationships.
14. Focus on different elements of cost, such as labor, materials, overhead, SG&A, and profit, by using comparative analytics.
15. Learn how to construct a break-even analysis chart.
16. Utilize learning curve analysis and coefficients.
17. Conduct make vs. buy or outsourcing acquisition decisions.
18. Understand the application of payback analysis, rate of return analysis, and time-adjusted rate of return analysis in capital equipment or fixed asset purchases.
19. Examine target costing techniques and target pricing tools.

The Program Outline

1. Introduction to Purchasing Analytics
Type “O” vs. Type “P” Purchasing Department. Purchasing Savings Impact on the Bottom Line. Improve Profitability through Better Purchasing Decisions. Purchasing Opportunity Assessment & Spend Profile. Power through Informed Negotiation. Forecasting & Understanding the Marketplace.
2. Price Analysis
Definition of Price Analysis. The Importance of Price-Cost Analysis. Price Analysis Processes & Techniques. Market Resources & Price Indexes. Difference between Cost Reduction & Cost Avoidance.
3. Solicitation Packages & Their Use
Types of Solicitation Packages & RFIs. RFQ/RFB/RFP Methods of Solicitation. Preparing & Evaluating RFQs/RFBs/RFPs. Solicitation Do’s and Don’ts.
4. Best Buy Investigation & Techniques
The difference between Price & Cost. Application of Discounts to Price. Equivalent Unit Costs. Market Basket Pricing review. Fixed Margin Pricing & Rate of Return Pricing. Price Escalator, Alternative Pricing Mechanisms, & Sample Language. Service – Major Cost Elements. Currency Exchange. International Landed Cost Optimization.
5. Purchase Quantity Analysis & Application
Purchasing Manager’s Decisions. Inventory Decision Costs. Replenishment Lead Time Components. Economic Order & Purchase Quantity. Order Point System. MAD Formula & Service Levels. Service Levels, Costs, & Safety Stock.
6. Cost Analysis & Supplier Breakdown Rationale
Major Cost Elements. Analysis of Costs. Elements of Cost-Key Factors. Supplier Cost Breakdown Details. When to Perform Cost Analysis. Input for a Cost Buildup & Internal Estimate. Six Basic Elements that Affect Costs.
7. Improvement & Experience Curves
The Learning Curve. The Use of the Learning Curve in Purchasing. When to Use the Learning Curve. Using Learning Curve Coefficients.
8. Total Cost of Ownership (TCO) Process Rationale
Priceberg and TCO. Typical Supplier Cost & Price Structure. TCO vs. Total System Cost. TCOP Report. Supply Based Management Costs. Supplier Cost of Ownership-Assessment. Activity Based Costing-TCO Impact.
9. Examination of Target Costing & Target Pricing
Target Costing Process. Target Cost Breakdown & Impact. Target Costing Techniques & Tools. Identification of Areas to Improve. Target Pricing & Cost Model Example. Open Book Costing.
10. Break-Even Analysis & Usage
Why Do Break-Even Analysis? Cost Volume Profit Analysis. Constructing a Break-Even Chart. Computing Sales Value Only. More Reasons for Using Break-Even Analysis. Break-Even Analysis Tips.
11. Make-Or-Buy Analysis & Outsourcing Decisions
How Make-or-Buy Investigations Originate. Make vs. Buy Analysis. Cost & Resource Analysis in Make-or-Buy Decisions. Reasons for Outsourcing. Types of Unit Rate Structures. Financial Terminology Applicable to Outsourcing.
12. Fixed Asset Acquisitions & Capital Equipment Buying
Life Cycle Cost & TCO Calculations. Capital Equipment Total Cost Analysis Procedure. Buy, Rent, Lease – Comparative Analysis. Payback Analysis & Rate of Return. The Present Value Concept. Recommended Reading.