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Direct Materials Cost Analysis

Achieving Cost Reductions with Direct Materials

Typically there is significant savings to be realized when a company rationalizes their standard purchased parts or raw materials. It’s quite common for companies to end up with a proliferation of slightly different configurations or similar variations of standard purchased parts (example: multiple versions of the same screw that only differ by length). DFR helps companies identify the standard configurations that can meet multiple product applications. Convergence has helped its customer realize significant cost savings in the procurement for these types of direct materials. Quite often costs can be immediately saved from simply managing pricing variances, typically a very easy savings to implement.

Convergence also partners with other consulting companies to help with parts rationalization including Accenture. Accenture has experience using DFR to help other customers deploy cost savings activities from parts rationalization.

Convergence partners with companies to help with effectively sourcing direct materials, including Co-eXprise. Co-eXprise provides a direct material sourcing platform that makes it easy to source a large number of items in a single sourcing event, or what they call a market basket. DFR prepares the data around the parts for sourcing and also identifies the best sourcing clusters, or groups of similar items, that could be sourced in a single event or market basket. The combination of both technologies can help customers bring significant savings to their bottom lines.