Annual cost saving
In order to assure Iowa Elevators a successful future we decided to cut and reduce several costs that seemed unnecessary at the time. There three major purchase categories we would like to cut. The first obvious cost to cut is the farm supplies division since its operating margins are continually remaining flat. With cutting the farm supplies department Iowa Elevators would also save on salary costs for the four managers it had employed for that department. The second expense we will cut will be the transportation cost and third would be the MRO & construction. By cutting these three major expensive categories we will reduce 80 % of the purchases. In order to further reduce costs it is necessary to reduce the amount of suppliers that are currently being used (1,500). Twenty suppliers make up for 45 % of total money spent. By doing this we are going to able to build strong relationship with our biggest supplier to gain more purchasing power. This might give us an advantage on lower cost of goods. We are also going to monitor inventory turnover to implement a Just in Time system. Another project in mine will be hiring the correct people the job at hand.
Furthermore, Iowa Elevators would have to keep low inventory as opposed to housing unreasonable amounts of inventory in their facilities. In doing so there would be less turnover for the company. Lastly, if necessary the Iowa Elevators should consider reducing its staff and only keeping key employees that are needed.
Shortening Lead Times
Supplier Lead Time Reduction
Total Cost Purchases