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What to Do When Quality and Purchasing Costs Are out of Control

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With competition increasing and competitive advantage difficult to sustain, profits in the manufacturing sector today often comes down to cost containment. Unfortunately, market conditions, supply chain issues, labor issues, invasions, and other variables often conspire to elevate purchasing costs. Manufacturing businesses reliant on affordable replacement machine parts, consumables, and raw materials can turn to supplier relationship management to keep control on rising costs.

Manufacturers know that some supplies are more critical than others. So, it makes sense that all supplier relationships are not created equal, as well. Just as critical spare machine parts, personal protective equipment, and rapidly consumed inputs call for customized management, strategic supplier relationship management can lead to significant procurement cost savings and other efficiencies.

As manufacturing, production, retail, transportation and many other industries become more global and supply chain networks expand, complexities emerge. Interdependence, redundancies, regional and geopolitical situations can combine to reduce supply chain resilience and transparency. These inefficiencies drive up transaction and purchasing costs. Developing or outsourcing a robust supplier relationship management regime builds in a process for:

  • Monitoring, nurturing, and reinforcing supply chain performance
  • Controlling costs
  • Streamlining procurement

This ensures that the suppliers that contribute the most to carrying out the company’s strategy receive the attention they deserve. Supplier relationship management is the process of aligning corporate and operational strategy with these key suppliers to measure and maximize performance.

Reduce Purchasing Costs with Supplier Relationship Management

Manufacturers that have not yet instituted a comprehensive supplier relations management program face unnecessary challenges. Partnering with a supply chain and productivity expert like SDI can generate improvements in several areas including:

  • Procurement Cost Savings – Reducing purchasing costs is a primary goal of building mutually beneficial connections with strategic suppliers. By consolidating similar clients’ purchasing needs, SDI wields the market power to keep supply costs under control. Without a concentrated supplier relationship process in place, customers relinquish all market power to their vendors. Manufacturers, retailers, and other asset-intensive facilities management organizations that have been unable or unwilling to engage their critical suppliers have no influence and no leverage for negotiating lower prices.

  • Supply Security – Supplier relationship management deepens and solidifies puts manufacturing firms at top of mind whenever supply chain issues arise. Vendors who find themselves unable to fulfill their obligations due to logistical or quality issues must decide which customers will receive their scarce goods. Businesses that have taken the time to establish strong ties with their suppliers can move to the front of the line. With SDI guiding companies’ supplier relationship management, they benefit from our vetting and competitive bidding process. Vendors compete for coveted long-term contracts and repeat orders, making them more willing to comply with our rigorous standards not only in pricing but also delivery schedules, customer service, and other accommodations that streamline the supply chain.

  • Productivity – Actively managing and collaborating with important suppliers transfers knowledge and, eventually, as trust grows, responsibility for inventory tasks, freeing management and labor resources for other duties. Optimized supplier relationship management creates an environment where suppliers go out of their way to deliver superior service and resolve problems that can disrupt your operations. As manufacturers become more comfortable with sharing details of their workflow, vendors can deliver additional value such as inventory management and quality control. our supplier relationship management program delivers a level of effectiveness our clients would find difficult to duplicate, “given the sheer number of suppliers and interactions required to manage the MRO supply chain environment. We form an ecosystem within the MRO supply chain that delivers maximum value…through access to new technology, best practices in storeroom and inventory management, reliability and engineering services and cost management.”

SDI provides turnkey services to create real, sustainable savings for our clients by applying supplier relationship management techniques to a variety of operational, tactical, and divisional tasks centered on five primary tasks: segmentation, performance management, customer positioning, collaboration, and quality improvement.

Learn more about SDI’s approach to supplier management services and the results you can anticipate from them.

We can customize a plan to help your organization take advantage of active supplier management to create a flexible, responsive supply chain. Contact us to discuss your needs with one of our consultants.

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