To determine the annual cost reduction:
* Calculate the current annual cost: $20,000/month for Scope A + $2,000/month for Scope B =
$22,000/month. Annually, this is $22,000 * 12 = $264,000.
* Calculate the new annual cost with the new supplier: $19,000/month for both Scope A and Scope B.
Annually, this is $19,000 * 12 = $228,000.
* Determine the annual cost reduction: $264,000 (old annual cost) - $228,000 (new annual cost) =
$36,000. References:
* Procurement and Supply Chain Management by Kenneth Lysons and Brian Farrington
* Principles of Supply Chain Management: A Balanced Approach by Joel D. Wisner, Keah-Choon Tan,
G. Keong Leong