A few ideas for switching costs
By Chester L Karass -- Purchasing, 3/11/1999
In looking for ways to reduce costs it's important to look at elements other than price, for example, acquisition costs and cost of possession. Here are four areas to consider:* Usage. Every product has costs associated with its use. With a little imagination and negotiation, a seller can be persuaded to help reduce cost of usage. Examples: Delivering large items directly to the using area, collecting and paying for empty shipping containers, and providing technical support to assure the product is used and assembled in the most efficient way.
* Training. Sellers can and should train engineers to write better specs, train quality control how to inspect parts more effectively, train repair people how to fix a machine. Convincing a supplier to undertake training is often easier than it looks. Sellers realize that a customer trained in using their products remains loyal in good times and bad.
* Taxes. Tax consequences can legitimately be switched to a seller or third party. Alert buyers give thought to tax consequences every time they make a purchase, because a single day or the way a purchase order is written can reduce the price accordingly.
* Report work. Reports are costly, as well as a horror to prepare. Sellers may be more than willing to produce reports on such things as usage, back-orders, funding status, not to exceed payment limits, credit, and expedited status.
The Karrass Organization presents over 500 Effective Negotiating customized in-plant seminars yearly. Karrass consultants tailor the seminar to meet specific purchasing or sales needs. KARRASS EFFECTIVE NEGOTIATING Seminars are presented regularly in over 65 North American cities, including Canada and Mexico plus another 25 cities worldwide. Also available: Fundamentals of Effective Purchasing, a program presented at public and in-plant sessions nationally. For more information on Karrass books and seminars call 213-951-7500 or visit us at www.karrass.com, or mail us at 8370 Wilshire Blvd., Beverly Hills, CA 90211-2333.
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