The process of designing a product with a trusted supplier in order to eliminate costs...

The correct term is Cost Out, a proactive cost management approach where the buyer collaborates with the supplier during the design phase to eliminate unnecessary costs before they arise. This ensures efficiency and value creation throughout the product lifecycle. For example, designing packaging to minimise waste or using standardised components to avoid expensive customisation.

This differs from:

Cost acceptance, where the buyer accepts the supplier’s price without analysis.

Cost engineering, a broader process of optimising costs through design and process evaluation.

Cost down, which typically involves reducing costs after production by analysing processes, renegotiating contracts, or improving efficiency.

Cost Out is especially relevant for strategic or high-value categories where innovation and collaboration with suppliers can generate long-term savings. It is consistent with category management’s emphasis on strategic supplier partnerships.

[Ref: CIPS L5M6 Study Guide, p.80 – Cost Out vs Cost Down strategies]