Why Should a Company Include the Procurement Department when

1. Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com

2. Why Should a Company Include the Procurement Department when Implementing Cost Control Standards? Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com

3. Establishing correct cost control standards for a manufacturing company’s expenses is important because the accuracy of the standards usually determines the success of the standard cost control system. Senior leadership, mid-level managers, and employees should approve the baselines used for the standards. While finance and engineers provide technical information about the tightness of standards, the final decision should reflect input from the production line managers and their immediate managers. Face-to-face communications, bargaining, and interaction should take place before standards are adopted. The plan should win the support of all stakeholders and senior management, who will be empowered to hold people accountable for these results. Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com

4. Standard costs become the building block for the company’s budget. After establishing standards for each unit produced, finance calculates standard costs by the total units they plan to produce to determine budgeted costs. A standard cost control system makes supervisors and employees cost conscious because variances between standard costs and actual costs helps identify wasteful spending. These cost variances between budgeted costs vs. actual costs serve as a tool guiding managers towards cost improvements. The process of establishing standard cost control systems assists in the company’s planning for efficient and effective economical operations. Managers need to understand all factors affecting costs when setting standards since they often discover operations needing improvement. Setting cost standards involves defining goals and reviewing those goals with all employees to ensure they understand their roles in the attainment of these goals. Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com

5. Material standards consist of both price and usage standards. Engineers develop the specifications for the types of quantities and materials used in producing the goods. Operations schedules the list of materials and quantities required for the expected volume. The procurement department receives the operation schedule and bills of material working jointly with the engineering department. This information becomes the basis of the material price standard. Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com

6. Manufacturing companies implement zero defects on material quantity standards. Focusing on zero defects is to avoid losses of material and to isolate them for study when they do occur. Typically, companies charge department centers that caused the waste or the error in production. As a result, companies have not built in time for rework. Companies must be careful in preventing errors, because rework will cause regular production hours to be consumed and the customer delivery times could be prolonged. Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com

7. If a company holds its procurement department accountable for only the price of purchased components, not their quality standards, procurement’s motivation is to find inexpensive vendors. The department is less concerned about meeting the material quality specifications. The cheaper materials often require substantial manufacturing rework time. This causes unfavorable labor efficiency at the same time the procurement department has a favorable material price variance. To prevent this from occurring, the procurement department must meet the material qualities specified. The procurement department is responsible for material price variance and they should help set the price standards. This is done by studying market conditions, vendors’ quoted prices, and the optimum level size of a purchase order. The Just-in-Time (JIT) management philosophy minimizes inventories, keeping materials on hand for the amount needed in production until the next order arrives. That is why it is important to include the procurement department when implementing cost control systems. Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com

8. About Above the Standard Procurement GroupAbove the Standard Procurement Group® provides cost reduction, procurement outsourcing, and business growth services. They are a privately owned company located in Middlesex, NJ. Above the Standard helps small to fortune-100 companies, hospitals, non-profits, and school districts save money on products and services they are already buying and improves their bottom line. Their founder has delivered results over 30-years saving clients billions of dollars. Above the Standard Procurement Group® provides their services on a pay-for-performance basis meaning there are no up-front costs and only make money if there are cost savings. They share a percentage of the cost savings when the program is implemented. To know more visit - http://www.atscostreduction.com/ Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com

9. ATS Cost Reduction and Business Growth Contact Us ATS Cost Reduction and Business Growth Contact U Compass Advisory Services Corp. P.O. Box 686, Middlesex, NJ 08846 , Office: (732) 271-1700 , Fax:  (732) 271-1701 , Attn: Dan Barlette, Jr. , e-mail:  DBarlette@ATSCostReduction.com