How to Leverage Economies of Scale for Continuous Cost Reduction
By the time most organizations identify a need for cost reducing initiatives, they are experiencing some type of financial issue where they may be spending more than they're earning. The typical solution for these situations is to consult a procurement group or firm that can offer insight on how to cut back on spending in multiple areas of the business without sacrificing quantity or quality. But what happens after these sourcing processes are implemented?

Usually, businesses are satisfied after they've revised their spending and believe their current supply chain is operating as efficiently and effectively as possible. However, there are still further opportunities for continuous cost reduction in supply chain that can be revealed with changing market landscapes and influences from the economy as prices fluctuate. Leveraging economies of scale is one way to discover areas of any business that can experience continuous cost reduction. The strategic sourcing and supply chain professionals at Source One provide their recommendations for guaranteeing your supply chain is reducing costs on a regular basis.

Manufacturers & OEMS:

Base production schedules on demand for maximum optimization - Carefully evaluating and planning production schedules will allow OEM's to reduce the variable unit cost of the goods they're producing. By anticipating demand and working with the manufacturer to decide when production should be escalated to produce as much as possible and leveraging larger run sizes, which results in cost reductions that can be passed on to the customer.


Forecast demand & schedule deliveries- In this case, distributors can leverage the total volume between you and their other customers for common parts that you both buy to offer cost savings through reduced carrying costs. Together, your team and your supplier, can discover reduced spend in their processes that will translate to increased savings for your organization.

In the latest episode of Source One's Countdown to ISM2017 series, Consultant Ken Ballard discusses Leveraging Economies of Scale for Continuous Cost Reduction. Following a podcast explaining how to achieve transparency in supply chain, Ballard provides further examples of how to ensure your supply chain continues to experience savings beyond a sourcing process. The Source One Countdown to ISM2017 series continues with more insights in anticipation of the annual conference hosted by the Institute for Supply Management. The event welcome supply chain professionals from around the world, and features the sub conference ExecIn, exclusively hosted by Source One. ExecIn invited high level procurement professionals attending ISM2017 for presentations and informative sessions that are designed for them as decision makers in their organizations.
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