Cost Down Reduction Strategy

Act as a NPI Buyer was tasked by Management to investigate cost down reduction activities with recommendation and proposal to SCM Director $.$ Management requesting to have cost saving USD $1\mathrm{.}2$ million derived for past purchased $2022$ across all commodities spend to suppliers.

Last year, our company named it as an ABC company $,$ have recorded of sales revenue generated $60$ million. Background context specialized in contract manufacturing $,$ semiconductors, vertical integration assembly and manufacturing Sheet metal$($Frame$,$ structure and panel $).$

Attached Management letter.

Request to write an email to Supply chain down Director for following.

$1)$ Overview, $/$introduction$.$

$2)$ give some ideas and datas as well for potential cost reduction activities turn into tangible result. At least $5$ to $8$ points or more $.$

$3)$ Conclusion, if any

Data provided information.

$1)$ Outline idea for cost reduction for commodity Standard parts purchased

$2)$ Outline idea for cost reduction for commodity Treatment, plating services and secondary process purchased.

$3)$ Outline idea for cost reduction for commodity raw materials bulk purchased strategy $($ pro versus con$).$

$4)$ Outline idea for cost reduction for commodity sheet metal purchased strategy $.$

$5)$ Total requested for cost reduction amounting to $1\mathrm{.}2$ million covering whole commodity purchased. Last years company sales revenue $60$ million.

$6)$ Outline idea for cost reduction activities for installation and assembly of machine.$($internal assembly worker versus used outsider sub contractor$)$

$7)$ Change MIG$/$TIG welding versus laser welding, elaborate details, percentage cost savings, details plan if any.

$8)$ Cable harness assembly, PCBA parts cost saving proposal if any $.$Data

Dear Valued Supplier,

Over the past few years, the global economy has weathered an unprecedented series of

challenges. From the initial disruption caused by the global pandemic to the subsequent

impacts of events such as the Russian invasion of Ukraine, our world has witnessed a

tumultuous economic landscape. These disturbances have had far$-$reaching consequences,

affecting supply chains, material costs, energy prices, and transport logistics$.$

These challenges have significantly affected our ability to deliver products to our valued

customers. Issues have ranged from material scarcity and logistics complexities towards the

fierce competition for capacity, In response to these obstacles, we have worked closely with

our suppliers to navigate these difficulties.

We supported a substantial amount of upwards price adjustments and longer lead$-$times in

our operations. We recognized the necessity of these measures over the past few quarters,

however we now observe positive shifts in the situation. Many indices are showing declines

compared to the last two years, with price levels as low as $2021($see annex A$)$ and

significantly shorter logistic cycles.

We firmly believe that market conditions have improved and a reevaluation of our business

practices and price levels is in order. There is substantial future growth on the horizon that

the team would like to discuss with you. To make this growth a reality, we need your

continued partnership in identifying and implementing cost$-$saving strategies for our $2024$

pricing and beyond. We will initiate one$-$on$-$one discussions to explore collaboration on lower

material, operational, energy, and freight costs while enhancing overall performance, leading

to a substantial reduction in pricing for $2024.$ Target reduction $>10\%.$ We also want to

explore shortening of lead$-$times and$/$or investigate other replenishment strategies.

We understand that you may be doing business with multiple locations. To streamline

our approach and enhance mutual efficiency, has appointed one lead buyer

representative who will oversee this approach for all locations.

$\text{'}$ Raw material $-$ per Sept $2023$

London Material exchange $($LME$)-$ Aluminium & Nickel based alloys

Average price per month

Internationally acceptable and recognised

Specific materials