NEC Corp. now plans to cut the number of its parts and material suppliers by 30% by the end of March to sharply pare down procurement costs by $3 billion in two fiscal years, ending in March 2003. The Tokyo-based the electronics conglomerate is cutting their supplier base to 4,500 from a year-ago level of 6,500.

NEC expects to use these cutbacks, and other procurement reforms, to achieve 20% savings in the fiscal year beginning April 1 and an additional 10% saving in the following fiscal year. NEC will place larger quantity orders with the remaining supplier base and obtain lower prices as a result. Working with fewer suppliers is also expected to bring greater procurement efficiencies and speedier deliveries. The firm is also speeding up the completion of its online parts ordering system, code-named Pegasus, and establishing greater ties with vendor supply chain management systems.

NEC said it also hopes to cut parts costs by having design engineers work more closely with its supply chain staff in the early design phases of products to utilize the most cost effective components. The firm is also expanding its acquisition of parts and material outside of Japan, especially from China, where it hopes to obtain greater savings.