5 Steps Indirect Buyers Use Unlock Savings Opportunities with Cost Tables

Indirect spend categories like temp labor, packaging, freight, and capital equipment are notorious for hiding savings in plain sight. 

Experienced indirect buyers have learned that cost tables transform the way organizations manage these categories. Here’s how you can leverage cost tables to drive real results. 

Why Cost Tables Matter 

Indirect categories are complex. They often involve dozens of suppliers, multiple divisions, and a wide range of products or services. Without a structured approach, spend analysis becomes guesswork, and savings opportunities slip through the cracks. 

Cost tables are the antidote. They organize your spend data, supplier quotes, and cost drivers into a format that’s easy to analyze, compare, and act on.

Whether you’re reviewing temp labor rates, corrugated packaging specs, or freight lanes, a well-built cost table is your foundation for smarter decisions. 

Here are five steps you can use for unlocking savings opportunities on indirect spend. 

Step 1: Define Your Category and Cost Drivers 

Start by clearly defining your category. Are you looking at packaging as a whole, or breaking it down into corrugate, pallets, wraps, and labels? The more specific your definition, the more actionable your cost table will be.  

Identify Cost Drivers

Next, identify the cost drivers — the attributes that influence pricing.

• Temp labor: skill level, location, hourly rate
• Packaging: material type, dimensions, order quantity
• Freight: lane distance, weight, accessorials

Review sample quotes and invoices, brainstorm with stakeholders, and make sure you capture all relevant drivers.

Step 2: Build Category-Specific Cost Breakdowns 

Generic cost breakdowns rarely work for indirect spend. Suppliers struggle to fill them out, and you end up with inconsistent data.

Instead, tailor your breakdowns to each category.

Examples of Effective Cost Breakdowns

• Temp Labor: Hours per week, location, fee structure, conversion terms 
• Corrugated Packaging: Material, flute type, dimensions, service level 
• Freight: Origin/destination, rated class, weight, accessorials, total cost 

Structure for Consistency

Use Excel best practices:

• Structure data in rows for easy aggregation
• Protect cells so suppliers must provide details
• Use pick lists for standardization

Step 3: Aggregate Data into Cost Tables 

Gather supplier quotes and attribute data and aggregate everything into a cost table.

This table becomes your quick lookup for similar SKUs or services, a validation tool for new quotes, and the foundation for deeper analysis. 

Category Examples

In a corrugated packaging cost table, you can compare price per 1,000 square inches for similar items across suppliers and spot outliers. 

For temp labor, you can benchmark hourly rates and total monthly costs by role, requirements, and location.  

Step 4: Use Cost Tables to Identify Savings 

Here’s where the magic happens.

With your cost table in hand, you can:

• Spot inconsistencies: find suppliers charging above the norm for similar specs
• Validate quotes: ensure new quotes align with historical pricing and cost drivers
• Estimate costs: predict spend for new projects before going to market
• Build linear pricing models: use regression analysis to create predictive models

Real-world results?

Buyers have used cost tables to uncover:

• $670k in annual savings on hardware
• $1M+ on IT contract resources
• $132k on corrugated packaging

All by organizing the information they already had.

Step 5: Drive Continuous Improvement 

Cost tables aren’t a one-and-done exercise.

Update them regularly with new quotes, invoices, and market data. Use them to inform negotiations, challenge suppliers on cost drivers, and support strategic sourcing events. 

Strengthen Supplier Discipline

Encourage suppliers to provide cost breakdowns – make it a condition for quoting, especially when they request price adjustments.

The more data you collect, the stronger your position. 

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