Executive Briefings

Procurement Department Is Not the Place for Monogamy

Human nature has demonstrated that the longer we remain in a stable relationship, the less effort we place into maintaining or improving the relationship. In a supplier-to-customer relationship, this tendency is often substantiated through escalating prices and diminishing customer service over time.  That's why maintaining a secondary source of supply can mitigate risks and increase competition.

Several years ago, an organization used a sole transportation source for all of its inbound and outbound freight needs - remnants of its early days when it was a small business. The prices offered by the carrier had been steadily climbing, and freight damage was quite prevalent. Despite those problems, the company president was hesitant to change. After the business was moved away from the incumbent and divided between two alternative carriers, service levels improved and the firm reduced overall transportation costs by nearly 10 percent per year.

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Human nature has demonstrated that the longer we remain in a stable relationship, the less effort we place into maintaining or improving the relationship. In a supplier-to-customer relationship, this tendency is often substantiated through escalating prices and diminishing customer service over time.  That's why maintaining a secondary source of supply can mitigate risks and increase competition.

Several years ago, an organization used a sole transportation source for all of its inbound and outbound freight needs - remnants of its early days when it was a small business. The prices offered by the carrier had been steadily climbing, and freight damage was quite prevalent. Despite those problems, the company president was hesitant to change. After the business was moved away from the incumbent and divided between two alternative carriers, service levels improved and the firm reduced overall transportation costs by nearly 10 percent per year.

Read Full Article