By Lou Drendel
B-52 Stratofortress stroll round
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But there are limitations. To the extent that glass containers are more expensive to package and ship, small increases in the price of metal containers will not induce substitution. It is the relative performance of the products in key performance areas that determines the feasibility of switching. 2). Relative price performance of substitutes measures how well the substitute performs the desired function given its cost. For example, glass containers may be less expensive in price than metal containers but require more packaging to ensure delivery and may be more costly to ship.
7 A limitation of the Pareto analysis is that it focuses only on dollars spent and volume. It ignores other factors such as the criticality of an item to production and the risk inherent in limited supply or suppliers. Nor does it account for the fact that purchase costs are only one factor in the total cost of ownership (TCO). A more ﬂexible approach to analyzing spend is a portfolio analysis, which focuses on vulnerability and value. , Pareto analysis) is insuﬃcient to properly characterize the importance of certain purchases to the enterprise.
Multiple source refers to the use of more than one supplier. Commercial enterprises have recently engaged in substantial supply base rationalization in an attempt to leverage purchasing power and reduce total costs. This process focuses on achieving the right mix of suppliers for each commodity and often results in reducing the number of suppliers utilized. In keeping with supply base rationalization, some commercial enterprises will use only the minimum number of suppliers necessary to meet the buyer’s demand.