Statement 1: Client is a textile manufacturer (We need to understand what stage of the value chain they are at? Do they produce the fabric from fiber or do they only do conversion of unprocessed fabric into processed fabric? Their coverage of the value chain will give us the perspective on how we can lower costs)

Statement 2: They want to reduce purchasing cost (Depending on the answer to the above question, the main things they would purchase would include raw materials like fibers, fabrics, chemicals, colors, packaging etc.)

Statement 3: Whilst keeping product quality up (Would indirectly mean that they should not switch to cheaper ‘alternatives’ of their existing input products. But instead they should focus on lower purchase prices and higher utilization of the inputs.

Hence I would structure the thoughts in the following manner:

• Improvement 1: Negotiating lower prices from existing vendors
• Improvement 2: Negotiating lower prices from new vendors
• Improvement 3: Identifying wastage and hence opportunities of recovery and higher utilization
• Improvement 4: Identifying ways to use the inputs in a better and more effective manner that provides more bang for buck
• Improvement 5: Coming up with methods to use lower quality and cheaper ‘alternatives’ while maintaining quality
• Improvement 6: Changing the game and researching new methods to manufacture the textiles - that would require lower input cost

Unfortunately your structure is a little complicated even though it does hit on many of the relevant points. Also be careful about what you include - the second bucket does not really address the core issue. It is worth addressing as one of the smaller sub buckets if you have relevant information (e.g., purchasing team is inefficient) but does not really seem relevant to this question at all.

I like to answer structuring questions in the question framework so that each sub-question is also an answer to the overall question

Step 1 - rephrase the question so it is clear in its objective

What are the ways in which the can the client reduce costs while maintaining product quality?

Step 2 - create relevant sub questions - each of which answers the question above

• Can the client negotiate prices on current supplier contracts on its own?
• Can the client negotiate prices on current supplier contracts by partnering with others?
• Are there ways to maintain quality while using substitute raw materials?
• Are there new business models the client can pursue to achieve this goal? (e.g., vertical integration)

The answer to each of the questions above answers the overall question, and since the questions themselves do not ask about the same issue, they are mutually exclusive.

Udayan

Hi there,

This isn't MECE!

It's not CE (collectively exhaustive) because there are plenty of things you missed (use amount of material used, for example)

It's not ME (Mutually exclusive) because both are reducing cost.

Ultimately you have a few options. Just off the top of my head:

Framework 1

1. Reduce material costs
2. Reduce amount of material used
3. Change material used

Framework 2

1. Negotiate contracts with existing suppliers
2. Find new suppliers
3. Partner (with another company)
4. Vertically integrate (build your own or buy the supplying company)

I don't think the “purchasing function” cost is considered a purchasing cost. I would probably not consider this (or at least clarify before including it in the structure).

Regarding your structure, I find 1.1. a bit confusing. 1.1.1. and 1.1.3 are about material consumption reduction. But 1.1.2 is not, it is instead about changing to cheaper raw material alternatives.

So you should have 3 options at the first layer: 

1. Less consumption of raw materials

2. Lower price on raw materials

3. Cheaper raw material alternatives.