Business financial challenges for Companies operating in the O.G.P sector, have rarely been greater than they are today. Firstly, the International Banking Crisis contributed to the worst Global Recession in living memory. Then just as financial stability was ensuing, we find ourselves threatened by extensive falls in Oil and Gas prices, caused by overproduction and falling World demand.
These difficult economic conditions provide momentum for all organisations to reduce costs whenever possible. This pressure is felt by Oil & Gas Companies, Contractors, and all organisations working Upstream, Downstream, or throughout the relevant Supply Chain.
Such pressure can lead some Purchasers to perceive that the best way to cut costs is to introduce maximum competition by circulating enquires to multiple parties with the provider of the lowest “first price” receiving the Purchase order. However, such a strategy will often actually add to your overall costs, as it ignores the reality of the Total Cost Of Acquisition. In other words your first price is not your lowest price unless it’s your last price!
By definition, the “Total Cost of Acquisition” (TCA) is a managerial accounting concept that includes all the costs associated with buying goods, services, or assets.
Costs include: Payment costs, Shipping costs, Packing costs, Currency exposure, Bank charges, Communication costs, Engineering, Purchasing, Expediting and accounting staff time etc
The most effective way to reduce your total acquisition cost, is to reduce your vendor numbers to consolidate your spend and so facilitate “single source benefits” giving direct cost savings, many value added services, and total vendor commitment in support of your business goals.
Is it time you reconsidered your Company Procurement Policy and built your strategy on fact and not perception?
Contact GFI Enterprises Ltd today, and we can explain, and demonstrate with evidence, how we can help you reduce your Total Cost of Acquisition. Together we can turn an economic challenge into a positive for our Companies.