As companies move beyond rationalizing their supply base to driving savings from strategic sourcing, strategic supplier management becomes more important. This is particularly true in direct spend, where strategic suppliers and core spend directly influence overall firm performance. The Hackett Group, a global strategic advisory firm, says its research shows that world-class organizations outperform their peers in managing their direct spend, devoting about four times more FTE days per major supplier per year than the peer group. A major supplier is defined as one of the top-tier suppliers that make up 80 percent of a company's total annual supplier expenditures. The FTE may be an individual person, but is usually comprised of different functional personnel performing the activity.

The Hackett Group says world-class organizations adopt a measurably higher degree of best practices in the form of:

• More time spent on supplier partnering, versus supplier measurement.
• Higher degree of cross-functional teaming for supplier management and development.
• Greater sharing of best practices across a range of practices.
• More focus on total cost of ownership rather than just purchased costs.

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