Innovating up and down the supply chain

December 4th, 2012

Innovations at different points along the supply chain can affect your bottom line. Do you know how to access them?

Today’s post is from Steve Schwerin an account manager at SafeSourcing

It can be easy to focus on only innovations directly related to your company’s main line of business.  After all, isn’t that what you have most control over?  Without a doubt, the key to staying in business is focusing on what you add to the space you occupy in the supply chain.  Have you thought about how Negotiated Sourcing Strategies can open opportunities for savings that come from innovations in other locations along your supply chain?

What does this look like?  As is the case with your company, your suppliers have core competencies on which they are focusing; as with your company, they also have input costs.  Part of becoming better and better at their business is being able to do more with less leading to lower per-unit-costs.  At the same time, changes in their input prices can lead to the same result.  Both of these are the results of your suppliers working on their own profitability and/or benefiting from trends within a sector or even broader macro economic events.  Both of these can also result in lower input prices for your company.  Will they? 

The difficulty in getting these cost reductions passed on to your company is that it is in your suppliers’ interests to keep the cost reductions quiet.  While process improvements might be invisible to you on the outside, lower costs of your suppliers’ inputs, such as a drop in commodity prices, and are things you can keep tabs on through pricing indexes.  Here is where eSourcing can be of use.  Through eRFX strategies including reverse auctions, suppliers are motivated to reveal these price savings and pass them on to you.  While a drop in the level of a commodity index might be an indication of which products or areas to target, without the internet and innovations in sourcing itself savings in other parts of the supply chain would remain invisible.  As suppliers compete for your business, your costs decrease and your bottom line increases. 

staying with your current suppliers bring these savings into your company?  Why not be proactive?  Chances are that if there is pricing leeway within an industry, your suppliers are experiencing it along with their competitors.  Has one company discovered some as yet unknown competitive advantage?  Find out by inviting a basket of suppliers to compete for your business.  While suppliers might not volunteer to hand over some of the savings they are realizing, we all win when lower prices and increased quality are passed on to the end user. 

Let us help you.  For more information on how eRFX tools can help you access savings currently being realized in different areas of your supply chain, please contact your SafeSourcing Customer Service Representative.

We look forward to your comments.

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