Cost Containment Strategies: Challenges for Strategic Purchasing in the 1990s

Abstract

The development of cost containment strategies is becoming an essential source of differential advantage for firms. This article attempts to provide a conceptual framework for focusing on cost containment as an extension to the development of a coordinated procurement strategy. It further discusses the overlapping influences that determine the extent to which cost containment strategies can be implemented. The study then investigates various companies' approaches to devising cost containment strategies, identifying their structural fit, monitoring information for effective decision making, classifying parts so as to allocate resources effectively, and managing international external relationships to gain a competitive cost advantage. The conclusion reached is that cost containment can represent a viable objective for the procurement function itself, but it has still greater strategic importance in companies where procurement effectiveness is seen as a key to competitive advantage.

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