Cost Data Mining
In many cases, customers will raise the issue of payment terms, bonus agreements, and discount rates right at the end of negotiations with suppliers, in the hope of obtaining some small additional concession. Once obtained, however, these benefits are often never exploited, either because differing agreements are in place within the group or because of a lack of transparency.
In this situation, a thorough analysis of cost data can help. In the “cost-data mining” approach, data available internally on purchased products and services is exploited for potential savings—the potential for savings is often much greater than originally expected. The specific procedure requires analyzing the cost data from various angles in order to identify correlations or patterns among the dozens of fields in the internal databases. To this end, the fields are organized in clusters and associations are formed. Some examples:
Comparing bonus agreements between suppliers and categories
Comparing discount rates between suppliers and categories
Comparing payment terms between suppliers and categories
Comparing delivery terms and delivery times between suppliers and sites
Comparing rejection levels between product lines and suppliers