Reducing Total Acquisition Cost (TAC)

Total Acquisition Cost is the sum of all costs associated with the delivery of a product or service to your customer. It normally includes some or all of the following costs:

	Customer order entry & processing		Assembly or conversion
	Inventory & Waste or yield		Quality costs
	Administration		Freight - inbound and outbound
	Order / delivery size costs		Cost to receive and make ready
	Suppliers raw material, processing costs and added value activities		Supplier Supply Chain planning
			Acquisition of bought in materials and servicesSupplier’s raw material and internal costs

Supply Chain Excellence’s TAC tool is designed to allow in depth analysis of costs for either a purchase category or finished product which has been identified for study. The tool focuses attention on opportunities to reduce cost by highlighting the key cost drivers and sources of waste. Our interactive workshops then develop action plans which deliver both immediate and longer term sustainable cost reductions.

Objective - Identify and eliminate/minimize all non value-added activities in the supply chain for a nominated product group

Emphasis - Total acquisition cost of supply and the value it brings to the end product. It is not intended to:
– replace existing costing systems - it relies on data from these and other sources.
– become a full Value Stream Mapping exercise - it should be simple to implement

Delete - eliminate non added-value activities
Reduce - minimize or eliminate usage
Downgrade - ensure appropriate quality that is ‘fit for purpose’
Substitute - identify and introduce alternative products or processes
Replace - use something else
Standardize - minimize or eliminate complexity
Integrate - mesh in the processes and activities of production between purchaser and supplier

Supply Chain Excellence TAC Process

TAC relies on establishing templates corresponding to the common acquisition and supply routings utilized within your business and inviting teams to identify cost anomalies at the supplier, product and customer group level.

Benefits from TAC can be defined in two ways:

1. Direct (hard) savings - Reduction in actual costs, e.g.		2. Indirect savings - Efficiency improvements, e.g
	less packaging		shorter set up times
	lower component costs		simpler purchase to pay process
	lower production costs		reduced stockholding or VMI
	lower transport costs		lower process costs
	shared invest		NPD support
	lower inventory		transfer of tasks
		Note: may be possible to accumulate efficiency improvements to derive hard savings.

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