The best procurement experts are continuously seeking out the most cost-effective procurement sources. Even when the supply chain runs seamlessly and achieves best costs, there are always alternatives that could offer better benefits to your overall operations and profits.
If It’s Not Broke…
Why would you actively search for new vendors and suppliers when there’s nothing wrong with the procurement sources you’re using? Because there’s always room for improvement. The most competitive players in your industry are constantly updating and adapting their strategies. At the same time, suppliers are improving products, pricing, and other features to stay ahead of their competition.
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A new procurement source may offer:
- Lower prices, particularly in regards to total cost
- More reliability and fewer supply chain disruptions
- Better compliance with best practices
- Reduced shipping costs based on the supplier’s site
- Improved service or more opportunities for collaboration
- Socially and environmentally responsible policies that suit company goals
Add a New Vendor or Replace One?
There are always risks when you take on a new supplier. Jeopardizing an established vendor partnership is usually not worth that chance, even if a new supplier offers better value. Having too many procurement sources results in an increased workload for supply chain managers and often decreases the end product’s quality.
What do you do when you find a new source that could potentially improve your bottom line?
- Place small initial orders, offsetting any necessary cuts equally among existing suppliers
- Arrange a short ‘trial’ contract with the new vendor
- Communicate your plans with existing suppliers; some may renegotiate their own terms
Before You Sign
Think about more than the purchase price before you decide to take on a new supplier, even if you have a supply chain opening to fill. Suppliers should fit into your long-term strategies and be able to meet your expectations. Take the time to talk with potential vendors and consider the following:
- Corporate missions, goals, and values of the supplier
- Product innovation and plans for improvement
- The vendor’s response to industry trends
- Supplier reputation and contract history
Know When to Let Go
An established, collaborative partnership should never be sacrificed unless the supplier is repeatedly failing to meet the terms of your agreement or another problem arises. However, vendors who don’t fulfill your expectations will slow down your supply chain processes and decrease profits. Evaluate your vendors regularly and openly communicate any concerns you may have.
Letting go of suppliers that fit one or more of the following descriptions could increase the overall efficiency and profitability of your supply chain.
- Consistently unreliable with shipments, quality, prices, etc.
- Refuses to share data about their company or operating procedures
- Has complex rules that need extra resources to manage
- Excessive pricing or terms compared to competitors
Your supply chain is constantly in motion. Your procurement sources have to keep up if they want to stay ahead. It’s up to you to seek out the best values. [/show_to]