LONDON--(BUSINESS WIRE)--One of the most crucial but extremely underrated elements of a company’s budgeting process is the tracking of supplier cost. It is for this reason SpendEdge, a procurement market intelligence firm, sets out to provide procurement insights on how to analyze supplier cost and understand their direct and indirect costs and its consequences on the price of the product or services.
Procurement intelligence experts at SpendEdge have released a supplier cost analysis guide that informs buyers how they should perform supplier cost analysis and what questions they should be asking before making a business deal:
What are the business’s direct and indirect costs?
A cost that can be traced back to a specific object is classified as a direct cost. It includes costs like base salaries, labor, and materials -- a cost that contributes directly to the production of the final product or service. Indirect costs or overhead are costs that affect not just one product but the entire company, including communication and marketing costs, legal fees, and travel. Understanding direct and indirect costs will take buyers “One step ahead” of their suppliers, giving the precedence to choose a supplier that suits them best and strengthen their company’s budget to sustain in the competitive marketplace.
What is the price that competitors are paying?
“Are you being overcharged for a product or service?” Every buyer should know whether they’re paying too much for a service or product. Knowing what competitors are paying for the same services and products will allow the buyers to determine what is considered a fair price in their industry.
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Does the supplier understand your industry and its needs?
A supplier with an in-depth understanding of the industry’s dynamics, practices, and trends, as well as the habits of the industry’s customers, will be able to provide the best products and services at the best price. By doing so, the supplier manages to reach its financial goals at the same time sustain market competitiveness. Implementing supplier cost analysis will help procurement organizations have a solid understanding of how the supplier operates and what their business practices are. So, it is a win-win situation for both the sides in the game of “Buyers versus suppliers.”
What pricing structure best suits the business?
Buyers need to contemplate the advantages and disadvantages of the proposed pricing structure that the supplier is offering them. They should know whether there are discounts involved and whether there is a possibility of future negotiations if bundled pricing is available, and how potential pricing or financial conflicts between the buyer and supplier will be resolved. Buyers should also take into consideration whether the pricing structure will allow them to work effectively with the supplier to reduce waste.
With over 13 years of experience in procurement market intelligence, experts at SpendEdge employ supplier cost analysis technique to help their clients not just to procure the right products and services at the best price available, but also choose the best supplier in compliance with their needs.
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