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Opex directly impacts company's EBITDA (Earning Before Interest , Taxes, Depreciation and Amortization), which is a key financial figure for a company valuation ( a way to value a company is a multiple of EBTDA for example...) So the more your Opex is optimized the more you add value to the company. Capex impacts company' FCF (free cash flow): FCF =EBITDA-CAPEX.
Hence, optimizing both Opex and Capex is important to a company.
Reduction of OPEX is more important because it influences profit and loss statement while CAPEX goes to the balance sheet and only the annual depreciation will be considered in P&L.
Reducing CAPEX can be necessary to reach a certain ROI calculation for budget approval, to have budget available for other projects or improve working capital by do not spending it.Typically you achieve CAPEX cost reduction commerically by eAuction or negotiation or technically by reduction of requirements.
OPEX reduction comes from category management, tendering and negotiation BUT as well from budget limitation AND (often overlooked) from reduction of consumption.
Cost center owner is typically responsible for OPEX spend thus they are very interested and open for discussions. They have own ideas and deep knowledge that can be extremely valuable for procurement - it was always good to ask them!
Leverage purchasing operations to reduce spend can involve strict tendering processes, strict approval processes and re-negotiation of existing contracts.
CAPEX expense can be controlled by the clear scope in the tendering stage, by clear evaluation of technical aspects. In CAPEX technical evaluation should be very effective. If evaluated effectively it will be easy for the procurement to negotiate on the commercial aspects.
On other hand OPEX is the continuation of CAPEX, if the project executed with proper positioning of the requirement with proper forecasting of the future requirement, OPEX shall be reduced from the initial stage
Categories Suppliers capabilities and capacities system over operational system implemented
OPEX can be reduced by alinging the expenses strictly as per the BUDGET for that category of expense.
CAPEX can be reduced by not only looking at the PRICE of the capex , but the EVALUATION and understanding of the TCO ( TOTAL COST OF OPERATION ) in introducing the CAPEX .
In order to reduce expenses - you need to have the proper selection of suppliers by using TENDERING process for OPEX items .
