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Sourcing high-quality products with hard budget constraints

21 June

Sourcing high-quality products with hard budget constraints

Combining TWS's expertise in designing game theory based negotiation processes with their experiences in creating incentive schemes to motivate suppliers to share their know-how, TWS's consulting team developed a new sourcing approach: Target Costing.

In a nutshell, Target Costing uses competition between suppliers to optimise the technical concept under a fixed target price. In a Target Costing approach, technical specifications and requirements are limited to necessary minimum requirements to give suppliers a high degree of freedom in developing their own concept within the pre-defined budget.

Ultimately, TWS's client gave all suppliers the commitment that the supplier to offer the best concept while meeting the target price would be awarded the business.

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