Executive Briefings

Supplier Collaboration Is the Key to Value, Not Just Cost Reduction

Over the past 20 years, most companies have used strategic sourcing to restructure their supply bases and reduce costs. At times, the approach not only required confrontational relationships with suppliers - deemed necessary collateral damage in the quest for lower costs - but also enabled some suppliers to become so embedded that they were immune to future competitive sourcing efforts. Indeed, it is not unusual for 20 percent to 30 percent or more of a company's external spend to be dominated by these embedded suppliers. Today, reducing costs is no longer enough. Companies want value and they want their chief procurement officers to deliver it. How can CPOs get the job done? By first identifying and then collaborating with their key suppliers.

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Over the past 20 years, most companies have used strategic sourcing to restructure their supply bases and reduce costs. At times, the approach not only required confrontational relationships with suppliers - deemed necessary collateral damage in the quest for lower costs - but also enabled some suppliers to become so embedded that they were immune to future competitive sourcing efforts. Indeed, it is not unusual for 20 percent to 30 percent or more of a company's external spend to be dominated by these embedded suppliers. Today, reducing costs is no longer enough. Companies want value and they want their chief procurement officers to deliver it. How can CPOs get the job done? By first identifying and then collaborating with their key suppliers.

Read Full Article